The good, the bad and the ugly: How new ASX stocks performed in...

The good, the bad and the ugly: How new ASX stocks performed in 2018
Colin Kruger
By Colin Kruger
31 December 2018 — 12:05am
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Most of the investors who sunk $8.46 billion into the initial public offerings (IPO) that occurred between January and November are now holding shares worth less than they paid for them. In some cases a lot less.

"Over the last year, you would have lost a pretty substantial amount of money," said Bell Potter principal Hugh Robertson.

Viva Energy's CEO Scott Wyatt and chairman Hui Meng Kho at its ASX listing ceremony.
Viva Energy's CEO Scott Wyatt and chairman Hui Meng Kho at its ASX listing ceremony. CREDIT:JAMES BRICKWOOD

Viva Energy raised $2.65 billion at $2.50 a share in July. It was the biggest raising of the year. The stock hit a low of $1.80 in November after Viva announced that it would not meet its prospectus forecasts. The stock had barely registered above its IPO price since listing.

L1 Long Short Fund was the second largest raising of the year with $1.35 billion at $2 a share. It hit a low of $1.285 in December.

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Coronado Coal registered a double digit drop on debut from its $4 offer price, and has been on a slide every since. It hit a low of $2.85 in December.

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The market downturn has ensured a not so festive end to the year for investors, and killed off the traditional rush of IPOs ahead of the Christmas break.

According to ASX statistics, there were 125 new listing between January and November, compared to 143 for all of last year, and 133 in 2016.

The downturn will ensure we will end the year below last year's IPOs even though the market was on track to match the prior year as recently as the third quarter, said HLB Mann Judd corporate advisory partner, Nicholas Guest.

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He said the October market decline "really put on the brakes for brokers and investors."

Bell Potter's Mr Robertson also sees it as a sign that the current IPO cycle is reaching its end point.

"IPOs are very cyclical, it's vert much predicated on market and investor sentiment," he said.

This cycle has played out over many years and investors have made a lot of money he said, citing success stories like Afterpay and Bellamy's Organic.

Afterpay cofounders David Hancock, Anthony Eisen and Nick Molnar.
Afterpay cofounders David Hancock, Anthony Eisen and Nick Molnar.CREDIT:LOUIE DOUVIS

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He saw the failure of Online property conveyancer, PEXA, as a turning point.

PEXA had to pull its $2.2 billion float in October when investors fled in the wake of the US tech carnage.

It was sold to a consortium, including Link Holdings for $1.6 billion.

"That to me was the death knell for the IPO market for the time being," he said of the company which he praised as an "A-grade, company defining technology business."

The ASX did its best to talk up the successes for the year. It said stocks worth more than $45.8 billion listed on the ASX in 2018 making it a blockbuster year by this metric.

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The overall value of companies floated this year was bloated by the Wesfarmers spin-off of Coles Group and the Westfield merger with Unibail. These two new listings added $26.8 billion to the value of shares listed this year.

In retrospect some of the high profile float failures this year may have been a blessing for investors given the losses on the big names which did debut.

Aside from PEXA, there was also small business loans provider Prospa, which pulled the plug on its public listing 15 minutes before it was set to debut after an ASIC query about its lending model.

Ahmed Fahour took up the top job at Latitude Financial during the year.
Ahmed Fahour took up the top job at Latitude Financial during the year.CREDIT:ELKE MEITZEL

Non bank lender Latitude Financial, also shelved plans for a $2 billion raising from the market while it changed chief executives and awaited the final fallout from the bank royal commission.

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Mr Robertson played down the impact of the failed floats on market sentiment.

“What does the market far more damage is an IPO that gets up and doesn’t meet its numbers,” he said with reference to Viva's missed guidance.

Not everyone lost money this year, although the winners are few and far between. The New Zealand-based packaged dairy business Keytone Dairy was still trading at double its 20c IPO price as recently as December.

And there is no doubt that the money is waiting for the new year when a fresh batch of companies will test the markets again.

The Australian capital markets are "brimming with cash" and "need places to invest it," said Mr Robertson.

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Mr Guest said his firm had a few contenders in the Medtech, biotech and fintech space with plans for expansion.

"I think that's where continue to see quite a level of investor interest," he said.