Stockmarket floats are about to resume their usual numbers after a quiet period caused by the international credit squeeze, a leading small cap fund manager says.
Ben Griffiths, a senior portfolio manager with boutique small-cap fund manager Eley Griffiths, says the resurgence on Australian and US markets to near record highs means small caps and their advisers are likely to be heading for the market between now and Christmas.
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“The IPO [initial public offering] scene wasn’t helped by the events of August; there were probably a reasonable number of IPOs log-jammed by the volatility,” he says. “But we’re moving into a busy period now and I think we’ll see a couple break loose and come to market.”
The downturn in IPO activity follows a dive in the September Bloomberg Australian IPO index, the measure of performance by newly floated companies dropping 23% largely because of the international credit crunch.
“Demand for IPOs was tested because the appetite for risk was wound back, and that meant IPOs were put on hold, especially at the very small end of the market” Griffiths says. “Basically the market is a fickle thing: one minute the market looks under pressure and investor confidence ebbs, but now sentiment is coming back on and these deals are looking infinitely doable.”
Looking forward, Griffiths says we are likely to see IPOs for small caps such as Storm Financial, Commquest and copper miner Ivanhoe before the end of the year.
“We are coming to year end and the onus is now on investment banks and corporate advisers to get transactions up and running, otherwise there will be no opportunity to serious raise money until March next year, and who knows what the markets will be doing by then,” Griffiths says.