Floats Fail To Rise To The Occasion
The Age
Sunday August 6, 1995
A weak market during 1994-'95 has not augured well for new listings. James Dunn reports.
REFLECTING the weak state of the sharemarket for most of last year, 1994-'95 was a relatively poor year for company floats. During the financial year, floats were called off, or went ahead with large underwriting shortfalls and first- day discounts. The total amount raised in floats in 1994-'95 came in at $2.08 billion, a fall of 79 per cent from the peak of $9.8 billion in 1993-'94. There were 63 floats in 1994-'95.
Recovery in float activity is proving slow. According to the Australian Stock Exchange's Monthly Index Analysis, the six months to 30 June 1995 saw only $456 million raised in floats; that was 85 per cent lower than the $3.08 billion raised in the equivalent period for 1994.
That period included the floats of Gandel Retail Trust ($400 million), MMI Insurance ($330 million), CSL ($306 million), Davids Holdings ($204 million), Prime Credit Property Trust ($187 million) and SGIO Insurance ($165 million), all larger than the largest float in the first six months of 1995 Novus Petroleum, which came in at $157.5 million.
Since the end of the 1994-'95 financial year, however, the picture has improved, with the raising of $1.45 billion in the public offering of Qantas shares. Also expected before the end of 1995 is the $600 million float of Lihir Gold, a company being formed to commence work on the largest undeveloped gold prospect in the world on Lihir Island, in Papua New Guinea.
Later in 1995-'96, Optus is also expected to come to the sharemarket, in an estimated $550-million float.
The broking firm Macquarie Equities expects $5.45 billion to be raised by way of floats in 1995-'96, which is 44 per cent below the peak of $9.8 billion in 1993-'94. The broker says government offerings will account for nearly 60 per cent of these floats, compared to 32 per cent and 22 per cent in 1994-'95 and 1993-'94 respectively.
In 1994-'95, says Macquarie, the only government asset floated was Tabcorp, raising $675 million. However, in 1995-'96, with Qantas, another tranche (or portion) of Commonwealth Bank, and the remaining 80 per cent of the AIDC, the broker expects this figure to increase to $3.24 billion. Macquarie Equities also predicts that the trend towards the demutualisation of mutually owned companies will bring Colonial and National Mutual to the sharemarket, in equity issues of $2 billion each. Colonial is required to convert to limited company status within three years of its 1994 purchase of the State Bank of New South Wales, while National Mutual has placed before its policy-holders a proposal to demutualise and list publicly within two years.
© 1995 The Age