The initial public offerings (IPO) market is set for its best year since 2005, as a likely $5-billion float of Nine Entertainment Co paves the way for others listings.
Reports suggested Nine owner CVC Asia Pacific had appointed investment banks to advise on the sale and work towards an IPO in the first half of 2011.
Much depends on the share market's strength. IPO activity stalled in the second quarter of last year as the European sovereign debt crisis shook global equity markets and reduced risk appetite. Several IPOs were shelved.
The IPO market has better form going into 2011. The $4-billion QR National float has had a promising start since listing in November 2010, its $2.45 shares (for retail investors) rising as high as $2.90 before settling back at $2.78 at the time of writing.
Queensland flooding could affect QR National's ability to meet prospectus earnings targets, but the rail operator is off to a much better start as a listed company than the last float of note, the $2.3-billion offer for Myer Holdings, which has traded below its $4.10 issue price since listing in late 2009.
Another key float in 2010, the $400-million offer for coal operator Aston Resources, has performed well. After institutional investors baulked at its valuation, Aston was repriced to $5.96 a share in August and has since rallied above $8.
The collective performance of IPOs was strong in 2010. Almost 60 of 93 floats in 2010 finished above their issue price; in 2008 and 2009, the majority of floats fell below their issue price.
Total IPO capital raisings in 2010 of almost $8 billion were well up on $3 billion raised in 2009 and $2 billion in 2008.
Recent IPO activity, high commodity prices and a share market that looks on firmer ground than this time last year should boost IPO volumes in 2011. The big headwind is more trade sales, as assets are sold to cashed-up companies or in secondary sales to private equity firms, rather than by IPO.
Also, sluggish retail conditions will dampen prospects for a string of private-equity-owned assets that were expected to proceed with an IPO last year.
If all goes well, the IPO market could raise more than $10 billion this year. A successful Nine Entertainment Co float would make it easier for several other large and mid-sized companies to float, although the reverse also holds true.
However, 2012 could even be bigger, with multi-billion-dollar assets such as Seven Media Group and share market registry company Link Market Services expected to float.
