A lack of growth has led to a window of opportunity for companies that have it. Photo: iStock
Investors hungry for returns typically turn to initial public offerings to gain exposure to high-growth companies.
Names like Surfstitch and Wellard, however, both of which joined the ASX within the last two years, have this week cast a shadow over new floats.
But the poor performance of these two stocks, which have had to own up to embarrassing profit downgrades, is unlikely to turn investors off floats completely, David Heathcote, national head of deal advisory at KPMG, said.
Motorcycle Holdings has enjoyed a successful IPO with shares trading 32.5 per cent higher. Photo: Rebecca Hallas
"The appetite is there, though largely for robust businesses," Mr Heathcote said. "And while the performance of stocks post issuance has been a bit of a mixed bag, any poor performances have been impacted by the overall All Ordinaries index, which this year has been quite volatile."
In a week where the ASX took a beating as commodity prices fell, tech recruitment company LiveHire's shares slid on its maiden trading day on Friday to close 0.02 per cent lower than its 20¢ issue price.
It followed New Zealand-based cloud accounting start-up 9 Spokes, which felt the sting of cold IPO reception on Thursday after its shares plunged 25 per cent.
Perth-based live cattle exporter Wellard became the biggest dog of recent IPOs on Friday after it issued its second profit downgrade since listing in December 2015. Its stock plunged more than 19 per cent on Friday to 48¢ and is down a whopping 65 per cent from its $1.39 issue price.
Despite expecting to ship a record 450,000 head of cattle the group warned its inability to pass on higher prices to its major Indonesian customers had hurt margins. Delayed shipments were also blamed for cutting its pro-forma 2016 profit forecast to between $23.5 million and $30 million, or as much as 49.3 per cent lower than its prospectus forecast.
Despite the commotion and headlines, however, out of the 11 companies that have raised more than $10 million since the beginning of the year, returns have been positive for eight stocks, according to Dealogic.
Shares in software group WiseTech Global, which listed in April after raising $167.6 million at $3.35 a piece, have soared over 30.7 per cent since then to $4.38.
Motorcycle Holdings, which owns 34 motorcycle dealerships across Australia, also stood out during the first half of 2016. Shares in the company have surged 32.5 per cent, from its offered price of $2, and were fetching $2.65 on Friday.
"Investors are looking everywhere for growth and the sectors showing that are certainly tech and healthcare," said Ian Turner, national leader of corporate finance at Deloitte.
"And as with Motorcycle Holdings, these transport and automotive industries are very interesting. They have large-scale and can have real financial impact."
China Dairy Corporation, which listed only two days later, has felt the ructions of a volatile share market. After the stock listed at 20¢, investors piled in, sending the price to 40¢ on the same day, but since then the stock has lost its shine and is trading at 19.5¢.
"We're getting a bit low on quality businesses that can really come to market and drive that value," said Mr Heathcote of the market more broadly. "And while the share market has rebounded recently, it's certainly had an impact on the post-listing performance of those IPOs."
This week surfwear retailer Surfstitch, which has found itself lumped as one of the worst performing share-market floats in recent years, dished out its third profit downgrade. Since the company's IPO in December 2014 the price has fallen from $1 to 33¢, losing more than 60 per cent of its value.
But while some dramatic IPOs have kept investors wary, experts say June should prove to be an interesting month for listing companies.
"The window for IPOs is really June," said Mr Turner. "In the coming weeks we'll see how the market reacts to some of the companies coming online."
