Australian sharemarket listings hit a 20-year low last year, with just 29 new listings.
While the ASX sees brighter days ahead in 2025, a change in sentiment may be months away.
It seems companies with public listing ambitions are waiting for Australia’s economic outlook to clear, interest rates to fall and the volatility brought about by election results to fade into the sunset.
“We are expecting 2025 to be a very busy year with the market becoming increasingly active as the year goes on,” the ASX’s group executive listings, Blair Beaton, told the Australian in an interview on Wednesday.
Beaton said the number of new companies entering the market last year increased when factoring in offshore companies conducting secondary listings on the ASX.
A great indicator
He noted “unprecedented level of activity” in the final months of 2024, driven by discussions with company representatives exploring ASX listings and attending ASX-hosted workshops.
“It is a really great indicator in respect to what activity we are going to see in 2025,” he said.
Beaton expects the $30 billion Chemist Warehouse deal to have a major impact. Chemist Warehouse is merging with ASX-listed Sigma Healthcare which has a market capitalisation of around $4.5 billion.
“It will be the biggest new listing we have ever had,” he said.
According to Beaton, the ASX conducted around 15 workshops in the eight weeks leading up to mid-December, each involving around 30 companies considering listing on the exchange. Typically, this volume of briefings would occur over a six-month period.
Beaton also noted that the “expectation gap” between private equity owners aiming to sell their companies and the potential proceeds from an initial public offering (IPO) on the ASX had narrowed significantly.
“The expectation gap on valuations has disappeared,” he said.
“It has got to the level where private company investors are happy to sell their companies into a listed environment.”
Economics looking up
According to the ASX, the outlook for the Australian economy appears to have improved, with the potential for interest rate cuts later this year providing much-needed clarity. On a macroeconomic level, conditions have stabilised, particularly in relation to the interest rate cycle and inflation.
The market has faced significant challenges following 13 interest rate increases in a short period, which had a notable impact on economic activity.
Looking ahead, the expectation of stable or declining interest rates is anticipated to restore confidence in the market as the year unfolds. This shift is likely to provide businesses and investors with a more predictable environment to operate and plan within.
A more cautious outlook
The view of the ASX stands in contrast to a report by accounting firm HLB Mann Judd.
“So far there is little sign of numbers improving in the first half of 2025,” Perth partner and author of the report, Marcus Ohm, said.
“The outlook for 2025 is unclear, with the initial public offering pipeline for early 2025 limited to only three small cap listings.
“There continues to be a high degree of uncertainty, including an upcoming federal election, making it difficult to predict when the IPO market in Australia will experience any substantial rises in activity.”
Ohm believes the upcoming federal election shouldn’t have too much of a deterrent effect on those considering an IPO.
“It’s more likely that potential policies coming out of the US on tariffs, for example, could have a larger impact in terms of commodities prices and the market,” he said.
The numbers
ASX data reveals that companies raised A$4.1 billion in 2024 through 67 new listings, including IPOs, dual listings, and debt listings. This marks a 284% increase from the A$1.07 billion raised in 2023, which involved only 45 companies. However, the 2024 total fell short of the five-year average of A$4.9 billion for the ASX.
Additionally, ASX-listed companies raised A$35.9 billion in follow-on capital during 2024 through 1,271 transactions, surpassing the A$26.8 billion raised via 1,157 transactions in 2023.
According to the ASX, this marks the seventh consecutive year it ranked first globally by the volume of follow-on transactions.
Struggling juniors
The "materials" segment of the resources industry maintained its dominance in the IPO market in 2024, accounting for 13 listings or 45% of total IPOs. However, this represents a decline from 72% in 2023 and a five-year average of 56%.
Ohm noted the decrease in materials companies listing was primarily driven by challenging market conditions for battery metals. He highlighted the particularly difficult environment for junior exploration companies, especially in the second half of 2024.
"Only just over half the companies in this sector achieved their target subscription," he said.
In 2024, 10 industry sectors were represented in new listings, an increase from seven sectors in 2023. However, there were no listings in the software and services sector—marking the first time since 2010 that this sector did not feature in the IPO market.