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IPO market full steam ahead

According to the ASX’s website, 12 companies have made applications for IPOs, with the most hotly anticipated company on that list being Freelancer, due to begin trading on 15 November. Freelancer is an online marketplace for matching freelancers with jobs – in essence it’s a niche SEEK (ASX: SEK). Freelancer is seeking to raise just $15 million, and will shortly see the initial public offering (IPO) well oversubscribed given the company will have a market capitalisation of $218 million based on the 50 cents offer price.

However there are many more companies waiting in the wings and expected to seek a listing in the very near future. Some of the larger IPOs expected include television station owner Nine Entertainment, which recently released its prospectus with an expected listing date of 12 December and an indicative market capitalisation of around $2 billion; the well-known Dick Smith Electronics retail business; and credit-data company Veda — all of which will be coming out of the hands of private equity owners.

IPOs cause a lot of excitement for investors and can often pay off. Since their respective listings around mid-year, law firm Shine Corporate (ASX: SHJ), IVF specialist Virtus Health (ASX: VRT) and insurance broker Steadfast (ASX: SDF) have all significantly outperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). Their success is no doubt providing the impetus for the strong demand by investors for the latest round of IPOs. Meanwhile the sales prices being achieved, particularly in the case of last month’s OzForex   (ASX: OFX) listing, which was priced on a very high multiple, is all the impetus sellers need.

Foolish takeaway

Investors of course need to keep the frothing IPO market in perspective. Despite there being a number of recent successful floats to point to, there have also been floats on which IPO investors are still underwater including the high profile iSelect (ASX: ISU) and KFC restaurateur Collins Foods (ASX: CKF).

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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