Barclay’s bull or Pearce take? Why Aussie companies are looking at global markets for IPO opportunities

Each Friday, we highlight the key trading themes of the week, along with companies and sectors investors should be keeping their eye on.

We're excited to announce our weekly segment published in collaboration with Stockhead.

As part of the weekly recap for Stockhead, our Director of Trading, Trent Primmer, was interviewed to share some trading highlights of the week.

BBPT-Why-Aussie-companies-are-looking-at-global-markets-for-IPO-opportunities

Post-COVID bull markets have been defined in part by a flood of IPO activity, as companies look to take advantage of plentiful liquidity to take a run at the ASX boards.

At the halfway point of September, more than 100 companies have been listed successfully so far this year, with a strong pipeline still scheduled through the middle of October.

And Trent Primmer said it reflects something of a trend to ‘make hay while the sun shines’ as he noted that risk-on capital flows are still seeking strong pre-IPO returns.

 

Trent-Primmer

“If you look at the momentum we’ve had this year, I think that’s turning into a sense of urgency among advisory firms to tie off the current deals they have before the end of the year. And that’s partly because heading into the first half of  2022, it’s no one really knows what the market’s going to do”.

- Trent Primmer, Director of Trading

 

In that context, Trent added:

“We’re trying to avoid being too heavily involved in the pre-IPO space, heading into the end of 2021.”

However, Primmer did highlight two pre-IPO companies BPC is working with, which are unique in terms of where they are looking to list.

 

 

Looking abroad

 

One company in BPC’s advisory sphere is Verdant Earth Technologies, a clean energy play that’s developing the Verdant Energy Hub in the NSW Hunter Valley.

 

Verdant Earth Technologies

Verdant Earth Technologies Logo TransThe hub is a former coal power station that Verdant is converting into a 151MW biomass plant. And to fund it, the company is turning to US investors on the Nasdaq, where it’s scheduled to list “within the next couple of months”, Primmer said.

Barclay Pearce Capital is also advising Koch Metals, which is developing the Constance Range iron ore project about 280km from the Port of Karumba in North Queensland.

 

Koch Metals Limited 

Koch Metals logo-1While ASX investors are familiar with iron ore, Koch is looking to the UK as it eyes plans for a listing on the London Stock Exchange (LSE).

Why look abroad?

For Primmer, both Verdant and Koch operate business models that are subject to something of a ‘gap’ in Australia’s IPO market.

 

Trent-Primmer

“The idea from a corp advisor standpoint if you’re working companies that are going to be bigger at the time of listing — what are the chances you’re going to get a $200m clean energy IPO away in the Australian market?”

- Trent Primmer, Director of Trading

 

Trent says:

“For one thing, you’re targeting a much smaller pool of investors in this market looking to fund larger-scale renewable energy projects.

In that context, you’ve got a far better chance to tap US markets and secure not just investor funding but also government funding, and also have the company perform quite well at IPO.”

Primmer said it’s a similar situation for Koch Metals, where there’s “no happy medium” on the ASX for companies of Koch’s size.

 

Trent-Primmer

“In Australia, you’ve obviously got plenty of pre-IPO appetite for companies at the junior exploration or ‘speccy miner’ phase.They often get a bit of ‘IPO-love’, then they’re going to be reliant on good drilling results to keep the momentum going.”

- Trent Primmer, Director of Trading

 

On the opposite end of the spectrum you’ve got the traditional mining heavyweights, but not as much appetite for mid-size players.

Koch’s Constance Range project holds 242Mt iron ore identified as an exploration target, including 11.58Mt at grades of 57% Fe.

As it moves towards production, the company has entered into a (non-legally binding) Memorandum of Understanding (MoU) with a Vietnamese off-take partner for 1.5 million tonnes per annum.

In a recent investor presentation, the company flagged its preference for the LSE due to “greater access to capital, trade depth and recognition among London equity market investors”.

Trent said:

“From our perspective, we’ve got a lot of networks in UK capital markets that see value in an Australian iron ore development company of this size.” 

 

Trent-Primmer

“The sense on the ground is to list now. It’s the right time because markets are high, and there’s a lot of money in overseas equity markets. A lot of people want to get business done before the end of the year, so it’s a matter of taking the ball and running with it.”

- Trent Primmer, Director of Trading

 

Trent said:

“I think that’s notably different from even three months ago when people felt they had plenty of time to dot the I’s and cross the T’s with the relevant exchanges and get companies up and running.

But now the feeling is to do it quick smart and get the listing away on this side of the calendar year.”

 

To read the full Stockhead article, click here.


 

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