“This would include any relevant historical and current interaction with regulators and possible outcomes of those interactions, as well as any specific regulatory risks that the business may encounter,” the report said.

“With the government confirming that it is likely to act on most of the report’s recommendations, financial services companies seeking to undertake an IPO should be aware of any findings and recommendations that may affect expectations of what they should disclose to potential investors.”

Herbert Smith Freehills warned that financial services companies receiving grandfathered commissions should disclose how the abolishment of them will affect future profits. The government has indicated that it plans to abolish grandfathered commission payments from 1 January 2021.

“It would also be worthwhile for financial services companies to disclose any changes made in response to the commission’s findings and recommendations, particularly regarding remuneration models that have led to misconduct or the removal of conflict of interest that were detrimental to the customer,” the report said.

Financials were the fifth largest sector for IPOs in 2018, representing just under 10 per cent of the market by number of listings.

The report explains that continued trade tensions between the US and China, Brexit, state and federal elections in Australia and the regulatory fallout of the financial services royal commission will all test market confidence in the first half of the year.

Michael Ziegelaar, Herbert Smith Freehills partner and global co-head of capital markets, said some IPOs will still try to time the market perfectly for launches, which will be challenging.

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“IPO issuers and investors may have to accept that these transactions will need to have a greater focus on the long-term rather than the short.

“However, 2019 is shaping as a classic IPO year where the IPOs occur in the second half, after some volatility has calmed. And once the IPO window does crack open, we expect it will open properly for a solid end to the year.”

The challenging start to the year follows a difficult 2018. The report found that although the 2018 IPO pipeline looked healthy, volatile markets and a complicated regulatory and political backdrop saw a number of highly anticipated listings postponed, including Latitude Financial Services and Prospa Group.

Meanwhile, other IPO prospects such as Colonial First State Global Asset Management and PEXA were instead sold via trade sale.

“Throughout 2018, IPO windows with appropriate conditions for launch were tight due to market volatility at critical times, reflecting domestic and international uncertainty, including as a result of federal political instability, escalating trade tensions, increasing risk of a no-deal Brexit, the US mid-term elections and the US-North Korea summit, as well as market concerns arising from the day-to-day unfolding of the financial services royal commission and expected political and regulatory responses,” Herbert Smith Freehills partner and global co-head of capital markets Philippa Stone explained.

On the positive side, the report found that while there were fewer listings in 2018 than 2017, the IPOs in 2018 raised over A$1 billion more in capital than the previous year.

In addition, the acquisition and delisting of a number of large ASX listed entities in 2018, including Westfield, Investa Office Fund, Sirtex Medical, Aconex, Mantra Group and APN Outdoor Group, left the field open for prominent new listings in the diminished top end of the market.

Successful listings of larger mining companies in 2018 – including coal miner Coronado Global Resources, manganese miner Jupiter Mines and nickel miner Nickel Mines – suggests that issuers once again see Australian investors as receptive to new large resources stocks.

Looking ahead, the report predicts that globally, large IPOs in 2019 will be dominated by technology companies, with Uber, Lyft, Zoom, Slack, Palantir and Cloudflare all subject of speculation.