Will Australian IPOs Start A Winning Streak in 2025?

The Initial Public Offering (IPO) market in Australia during 2024 has been…interesting. Whether it has been a good year or a bad year is up for debate. If you’re the ASX, you’d say it was a good year just because there were non-resources IPOs as all – which there were not in 2022 and 2023.

Big listings like DigiCo REIT and Guzman y Gomez added themselves to the bourse and were popular with investors. The latter company has nearly doubled since listing after many said it was overpriced and yelled louder when it surged on debut – to no avail. As for the former, it raised five times more IPO money than any other float since the end of 2021 – which was an absolute monster years for IPOs and corporate dealmaking generally. But the bad news is there were less battery metals IPOs and the overall volume was weak. Plus, DigiCo REIT (one of the few REIT listings) is down 10% since listing.

For the sake of investors wondering what the IPO market holds in 2025, let’s take a look at this question.

The Factors That will Determine Australian IPO Success or Failure in 2025

What will either propel the ASX IPO market to new heights or leave it in the doldrums? Several factors come to mind:

• The Sectors IPOs will come from: The Australian market witnessed a more broad spectrum of IPOs than it did in 2022 and 2023. OK, not by number of companies, but by sheer capital raised due to Guzman y Gomez and DigiCo REIT. A diversification in IPO sectors will be good for the market, particularly if they are from sectors likely to do well. We are optimistic about consumer and gold IPOs…but not Virgin Australia if Bain does try and bring it to market.
• Favourable Monetary and Fiscal Policy: If and when interest rates start declining in Australia it will be good for public markets. But we do not know just when yet. Add into the mix that this year is an election year in Australia and there’s an added layer of uncertainty for investors. The election of Donald Trump and his promise to slash the US corporate tax rate represents a potential challenge to businesses in Australia generally.
• Investor Confidence: Investor sentiment in Australia towards IPOs is not that strong. Guzman y Gomez aside, listings have not done well. And it could take the performance of just one listing in the early months of 2025 that could set the tone for the rest of the year.
• Commodity prices: It goes without saying that there will be at least a few resources IPOs. Higher commodity prices will mean a better chance of explorers (and perhaps even miners) coming to public markets and (more importantly) doing well once listing.
• Private equity: We hate how private equity exploits retail investors by pumping up assets and cashing out to them. But the reality is, the flow of new IPOs will not be as abundant without them. Nonetheless, even they may decide to sell to other entities rather than the public. Just look at Bain’s decision to sell 25% of Virgin to Qatar Airways – this puts significant doubt on whether or not Virgin will list next year if at all. There have also been media reports they have wanted to cash out other businesses including Greencross, MYOB and TEG, but have been unable to because they have not found the right price.

Promising Sectors for IPOs in 2025

In our view, several sectors are poised to lead the charge in 2025:

• Technology: Australia’s ecosystem is no Silicon Valley but it is not that bad. Many investors will point to the $24bn takeover of AirTrunk and how it shows IPOs are not popular with private companies right now. But we’d argue it shows Australia has a good tech ecosystem and i t could produce some IPO candidates in the new year. We think this will be particularly the case with AI-focused companies.
• Healthcare: We are always bullish on the healthcare sector. But this year there is cause for optimism as there are a few Biotech stocks with clinical trial results to come in the first half of the year. Success could lead to more biotechs turning to the ASX to raise capital.
• Gold: Gold prices are going well right now and there’s little reason to suspect they’ll take a turn for the worse next year. This will mean miners’ projects will be more profitable, and explorers will find it more appealing to try and find the next Cadia.

The Global Context

Whichever side of the fence you sit on regarding the question of how to describe Australia’s IPO market in 2024 in isolation, there’s no question that it has been poor compared to other jurisdictions, particularly the US, and India. According to EY, India listed nearly twice as many IPOs as the US and two and a half times as much as Europe. The US still held the number 1 spot for IPO proceeds and achieved its 2021-peak once more. Moreover, EY thinks 2025 will be a good year, noting IPO activity tends to rise in the years following US presidential elections – usually this is industrials, technology and financials that lead the charge.

The Renaissance IPO Index (which tracks North American IPOs) will finish 2024 up 16%. There have been several high profile listings in the US including Reddit, Lineage and Concentra. What can we read into this for Australia? Well, there will be two things that will help the IPO market. First interest rate cuts (for the sake of investor sentiment); and secondly, high profile private companies going public. It is often said ‘never buy an airline‘ but we imagine any Virgin Australia IPO would do well at least on the first day just because it is a high profile company. Just imagine if Canva listed on the ASX.

What Lies Ahead?

As we peer into 2025, the outlook for Australian IPOs remains cautiously optimistic. But it will depend on interest rates going down, high profile companies coming to market, and the first new listee or two doing well, or at least not flopping.

Certain companies could represent unique opportunities but as they say ‘DYR’ or Do Your Research.

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