Newcomers to share market investing during their search for “rules of the road” come across conflicting advice regarding the risk/benefit ratio of investing in companies looking to offer shares to the public. This article will try to illuminate the mystery behind the contradictory views, offering some guidelines for investing in IPOs.
What is an IPO?
Australia is filled with privately held companies, with many at some point in their life cycle making the decision to offer ownership shares in their business to the public for the first time.
Companies make this decision for a variety of reasons, with some making the IPO more attractive to investors depending on their own strategies and goals.
Private companies have existing shareholders, ranging from outside investors to company owners and employees. An IPO provides early investors with an opportunity to sell their shares.
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Other companies go public to raise capital, either to pay off debt or to fund existing operations, increase research and development, or grow the business.
Why Invest in an IPO
Earning a return on their investment is the obvious answer, but why choose a company untested by share market forces instead of the many with existing financial and share price performance history?
The answer lies in the siren song of the opportunity to “get in on the ground floor,” with a chance for finding the explosive growth in the elusive “ten baggers” highlighted by legendary US investor Peter Lynch.
Investors with a high tolerance for risk may opt for the ten-bagger, but there are opportunities for more risk adverse investors with IPO companies already generating revenues and even profits.
Finding Upcoming and Recent ASX IPOs
The ASX website maintains a list of upcoming IPOs. Entering “upcoming ASX floats” into your favorite search engine will lead you not only to the ASX website, but also to financial websites specialising in IPOs and general financial websites covering IPOs of special interest.
The financial websites include recent IPOs, allowing investors considering jumping into the IPO market the opportunity to check the price movements of new ASX entries.
How to Invest in an ASX IPO
Many IPOs restrict that fabled opportunity to get in on the ground floor to institutional and high net worth individuals. Opportunities for ordinary retail investors exist, but they are limited.
Some brokerage houses allow investors to waitlist their interest in a specific IPO and hope the brokerage house will let them buy in to the shares allocated to the house.
Limited opportunities to buy selected IPOs can be found on the website Equity Crowdfunding & IPOs | Invest with Impact – OnMarket.
The most common method for retail investors to get in on an IPO is to buy directly after the IPO begins trading on the ASX.
The ASX website remains the definitive source, with an alphabetical listing with links to information on the upcoming IPOs. Clicking on a prospective IPO leads to basics about the company’s business and a direct link to the company’s website for access to the IPO prospectus.
The Prospectus is a “must read” for interested investors. These documents can contain an overwhelming amount of information, but the critical considerations investors need to understand can be found in these sections common to most IPO prospectuses.
- Investment Overview
- Industry Overview
- Company Overview
- Financial Information
- Risks
- Details of the Offer
Key considerations are often woven into each of the overview sections. What retail investors need to know begins with what does the company do to make money. Along with what is the demand for whatever the company is producing or planning to produce? Next comes does the company have competition.
Investors also need to know:
- Why the company is going public?
- How the funds raised from the IPO will be used.
- What are the plans for future growth?
IPOs have minimum requirements causing some companies to withdraw their applications if the minimum is not met. Although the original prospectus remains on the company website, there is no explanation for the withdrawal.
The IPO market is extremely sensitive to “wall of worry” issues in times with challenging macroeconomic conditions. While 2023 was not a good year for ASX IPOs, as 2023 drew to a close, some analysts predicted a rebound in 2024. The paucity of listings on the ASX and the multiple withdrawals suggested the rebound was not to be. Companies thinking of going public are reluctant to do so when the macroeconomic odds are against them, and 2025 appears ready to continue the trend of reluctance to list on the ASX in the midst of ongoing worries about a global trade war ballooning into a. full-blown global economic recession.
Going into the end of the first quarter of 2025 there were four upcoming floats listed on the ASX website – two with dates to be announced (TBA) and two with confirmed listing dates. As the quarter closed, one of the TBAs — Burrendong Minerals Limited — has withdrawn its application. The remaining IPOs are Marimaca Copper, scheduled to list on April 2nd, Stormeur Limited scheduled to list on June 3rd, and Siquiri Gold, still with a date to be announced.
Maricama Copper – April 2nd Issue Price AUD $6.00
Maricama is an exploration and development mining company registered on the Toronto Stock Exchange (TSX). In its IPO Prospectus the company states it is seeking a listing on the ASX to increase its profile and expand its liquid market for share purchases.
Maricama has multiple copper assets in Chile, with its flagship Maricama Copper Project in advanced stages of development. An estimate of mineral resources is part of a DFS (Definitive Feasibility Study) in progress.
The proceeds from the IPO will go into working capital, including the confirmation of metallurgical and geometrical field studies. The Prospectus states the company is not able to say at what point it will begin generating revenue.
Maricama trades on the TSX under the code MARI, with a current share price of CAD $5.60 and a market capitalisation of $534 million dollars.
Stormeur Group – June 3rd Issue Price AUD $0.20
Stormeur is the first Australian company to offer an accredited Cosmetique Clinic™ for cosmetic services and beauty and laser treatments. The company operates seventeen clinics spread across all five mainland Australian states.
Stormeur began operations in 2017 and incorporated in 2021 with the intent of listing on the ASX. Its core business revolves around non-surgical cosmetic injectable treatments. Proceeds from the IPO will go to open four new clinics – 2 in New South Wales and 2 in Victoria — and towards enhanced marketing and operations at existing clinics.
Stormeur may pursue acquisition possibilities in related businesses in health and personal services.
The IPO Prospectus shows the company is revenue generating, but not yet profitable, although EBITDA (earnings before interest taxes depreciation and amortisation) reportedly grew from $59,885 in the Half Year 2023 to $135,534 in the Half-Year 2024.
The company’s cosmetics injectables business is segmented into aesthetics and therapeutic treatments for medical conditions. Stormeur estimates CAGR (compound annual growth rate) of 19.6% for aesthetic treatments through 2030 and 17.6% for therapeutic treatments.
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Siquiri Gold TBA Issue Price AUD $0.20
Siquiri is a Canada based exploration company with a flagship project in the Siquiri basin in Guinea, West Africa, with three “highly prospective” exploration permits in the project. The company website claims the IPO was originally targeted for listing in mid-2024. Current market conditions are highly favorable for gold miners.
Proceeds from the IPO will go towards funding project development. The Siquiri Basin has a historical track record of gold mining but remains underdeveloped by modern standards. The Prospectus clearly states IPO funding will allow two years of fully funded exploration and development activities at which time the company may need to seek additional sources of funding.
A historical financial analysis performed by accounting firm BDO shows the company raised funds from private placements in early 2024, contributing to the Pro Forma Financial Statements included in the Siquiri IPO Prospectus.
As of 31 December of 2023, Siquiri posted no operating revenue and an operating loss of USD, $3.4 million dollars, up from $2.0 million at the close of 2022. Exploration expenses grew to USD $2.0 million dollars, up from $1.3 million.
Current assets at the end of 2023 were USD $1.1 million dollars with current liabilities of $3.2 million.
Siquiri may be in the exceedingly early stages of project development, but the market strength of gold stocks could not be much better, with the price of gold hitting multiple new all-time highs over the past few months.
Initial Public Offerings do present an opportunity to get in on the ground floor, but in most cases that opportunity is restricted to institutional and high net worth investors. Retail investors can apply for access, sometimes directly with the listing company but more often with a brokerage house that has an allotment of shares.
Upcoming floats can be found on the ASX website, and some websites dedicated to the IPO market. Each listing comes with an Investment Prospectus, which is the company’s case for investing. Sections in the prospectus can answer investor questions about what the company does or is planning to do, product demand, competition, financial history, and risks.
