As investors look to diversify from struggling resources stocks, the technology sector is increasingly becoming a preferred destination for Australian capital.
Investors, spooked by tumbling commodities prices (coal and iron ore in particular), have greeted opportunities to invest in the growing technology economy with open arms.
From hero to Xero
The number of mining companies choosing to IPO on ASX has fallen dramatically from its heydays in the 2000s. In 2010, mining companies raised $1.1 billion from 66 IPOs (accounting for 70% of all listings that year). Only four miners have successfully listed this year and raised $26 million among them.
The sector was not all bad news: copper explorer and ASX BookBuild pioneer Stavely Minerals (ASX:SVY) peaked at 69 cents end of July and is currently up 165% since listing. The stellar track record of management, and the large number of broking houses participating in their fixed-price IPO likely yielded a wider than usual following for a junior miner.
Technology companies, by comparison, have thrived in number and value in the last four years. Compared to 2010 when tech listings accounted for a mere 3% of all ASX IPOs and raised $60 million – in 2014 there were 10 tech IPOs raising over $900 million.
Perhaps more telling though, is the investor demand for tech stocks post-listing – investors can’t seem to get in and can’t seem to get enough. Silicon Valley start-up 1Page (ASX:1PG) jumped 70% on its first day of listing. Urbanise.com (ASX:UBN), the cloud based building service provider, closed its IPO early four times oversubscribed and jumped 50% on debut. Ozforex (ASX:OFX) was up 28% on its first day of trade, and iSentia (ASX:ISD) up 19% on debut and 41% since listing.
A lot of shareholder money left on the table there.
But it’s not just investors that are chasing technology stocks – there’s a new ASX trend – accidental tech investment, when investors in mining exploration inadvertently find themselves with holdings in tech companies due to reverse takeover offers (RTOs).
To just name a few – social media tech start-up MigMe (ASX:MIG) recently reverse listed into Latin Gold. Cocoon is in the process of completing a reverse listing into Prime Minerals (ASX:PMI). And, the 1Page listing was a mining company RTO as well.
Is SV the new kal?
With a persistently high AUD and Chinese demand for coal forecast to peak in 2016, it looks like the ASX may soon have a register of companies more closely resembling the residents of Silicon Valley than exhibitors at Kalgoorlie’s Diggers & Dealers.
This article was originally posted on the On Market Book Builds blog.