Insights

Opportunities in new company floats

21 September 2016

Opportunities in new company floats

We continue to see a steady stream of company floats or Initial Public Offers (IPOs) coming to market, although the current IPO cycle appears quite mature. Unlike previous cycles this far advanced, this one is still offering some attractive opportunities for investors.

The typical IPO cycle

The IPO cycle typically starts with the listing of higher quality companies. To overcome investor apprehension, they are often priced quite attractively and accordingly they generally deliver good returns for investors. The success of these IPOs then allows lesser quality companies to come to market, with the quality falling away over the course of the cycle. The IPO cycle will continue for so long as the market remains receptive. Sometimes, it will be a market correction that ends the cycle. This was the case with the GFC, when IPOs stopped dead.

Other times the end comes about as a result of a run of poor performing IPOs or a high profile failure. For example, the last IPO cycle ended with Myer, which floated in late 2009, and whose share price halved within two years (it has halved again since). The IPO cycle lay dormant until around 2013 despite the fact that the market was strong until then. It was at this point that the current IPO upcycle began... to continue reading this article, click here.

If you enjoyed this article, please share to help others find it. If you’d like the next article delivered to your inbox, select 'subscribe'.

Subscribe