The report found that, consistent with the global IPO markets, the Australian market retracted in 2022 from record heights seen in 2021. 

The report found that there were less than half as many IPOs in 2022 as compared to 2021 and that the volume of funds raised tumbled dramatically, from over $13 billion in 2021 to just over $1 billion last year.

HSF partner and joint global head of capital markets Philippa Stone explained: “Economic conditions in 2022 effectively inverted from 2021, with rising inflation and interest rates contributing to lower valuations and uncertainty, particularly for large capitalisation listings.

“Understandably, many companies that had been considering IPOs took a conservative approach in 2022, opting to wait for greater stability and visibility around inflation and interest rate movements.

“Given the large number of IPOs that have been put on hold, we expect IPO activity to return once market participants recover confidence.

“We hope, in the absence of further serious economic deterioration, which of course is a possibility, could be in mid-late calendar year 2023.”

The report advised companies to use the current quiet market conditions to prepare for when economic stability returns. 

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HSF partner Alex Mackinnon stated: “When the IPO window reopens, it will pay for businesses looking to float to be prepared so that they can minimise the lead time on their IPO and hit the optimal window.

“Now is the time for these businesses to get their houses in order.

“Potential IPO candidates should prepare for their due diligence, consider how they will effectively market their IPO, and ensure their board and management team is IPO and listed life ready.”

HSF partner Philip Hart also commented: “Given the general market and investor interest in ESG matters, we expect that there will be heightened investor and regulatory scrutiny of statements highlighting green credentials in prospectuses. 

“In light of this, due diligence needs to focus on the extent to which there is a reasonable basis for ‘green’ claims in order to minimise the risk of greenwashing allegations.”

The report outlined that despite the softening in the market last year, there were more IPOs in 2022 than in 2019 and 2020, signalling that the market has passed the extraordinary conditions brought about by the COVID-19 pandemic, and some issuers and investors are exhibiting greater comfort managing “ordinary” economic cyclicality.

HSF partner Nicole Pedler said: “Economic conditions in 2022 were borne out in the composition of IPOs coming to market, where we saw a continuation of old economy IPOs.

“One of the ASX’s core strengths has long been attracting smaller market capitalisation materials sector listings.

“This was certainly reflected in the numbers last year — consistent with 2021, most IPOs in 2022 came from the materials sector, which accounted for almost 70 per cent of all listings.

“In addition, for the first time in several years, materials listings also accounted for the majority of total capital raised.” 

For 2023, the report predicted that economic stability is likely to remain a concern for companies and will impact their approach to IPOs.

HSF partner Michael Ziegelaar said: “Given the current economic volatility, we expect that back-end bookbuilds will be more popular until economic stability returns, as they allow investors, particularly institutional investors, to reduce or manage the risk of price volatility between the determination of the offer price and the completion of the IPO. 

“Pre-IPO rounds will continue to play an important role in the evolution of businesses, especially given the lack of IPOs.”

The report also outlined sectors that are likely to see IPOs this year, predicting that the energy sector will do well, while technology sector issuers “might need to look at other avenues for raising capital”.

HSF partner Tim McEwen commented: “With global energy shortages, supply issues and price rises, we expect that minerals companies, especially those who focus on lithium used in batteries, will be a leading source of IPOs in 2023.

“In light of the volatility of interest rates, the elasticity of tech share prices, and previous years of high private valuations of tech companies that have subsequently fallen, tech IPOs are likely to be harder to complete unless they have a clear path to profitability. 

“This could result in tech companies becoming more reliant upon crowd-sourced funding and private equity.”