A focus on quality: IPO market and private equity

A focus on quality: IPO market and private equity

While institutional investors are underweight given the lower volume of initial public offerings (IPOs) in the current environment compared to prior years – retail investors are desperate for yield in the face of low interest rates. That doesn't mean they are happy to buy just any IPO though.

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Australia's IPO market has weathered the current global volatility well. But buyers are being understandably selective in their choices. Uncertainty, driven by a number of key global events including the UK's Brexit, the upcoming United States election and Australia’s own federal election, are contributing to continued market volatility. It is not surprising then that institutional investors in particular are limiting themselves to well-run companies with strong track records led by seasoned management teams and well-credentialed boards.

This article, A focus on quality, explores how businesses that are complicated and difficult to understand don’t have a real place in the IPO market in the near term. It covers:

  • lessons learnt showing why investors will continue to look at floats on a case-by-case basis
  • the ‘ASIC effect’ suggesting changes to ramp-up the requirements for historical financial information in prospectuses
  • changes in the dynamics around pricing for floats where more companies are adopting a front-end approach.

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