Brace for an IPO resurgence as new floats beat the ASX 200 by ~50%

New ASX stocks are beating the old in 2020 and some experts are predicting that this will trigger an IPO revival this year.

| More on:
pile of coins and the letters IPO with a red arrow going up, indicating newly listed shares price gains

Image source: Getty Images

New ASX stocks are beating the old in 2020 and some experts are predicting that this will trigger an IPO revival this year.

Initial public offering (IPO) platform OnMarket found that year-end IPOs outperformed the  S&P/ASX 200 Index (Index:^AXJO) by more than 48%, reported the Australian Financial Review.

The average return for all newly minted ASX stocks in 2020 was 46.9% compared with the 1.5% drop in the top 200 stock benchmark.

Best ASX IPOs of 2020

The Nuix Ltd (ASX: NXL) share price, 4DMedical Ltd (ASX: 4DX) share price and Aroa Biosurgery Ltd (ASX: ARX) share price are some examples of stocks that surged on the first day of trade.

The IPOs that delivered the best returns last year are the Tesoro Resources Ltd (ASX: TSO) share price, Cosol Ltd (ASX: COS) share price and 4DX share price.

The TSO share price surged over 800% in the period, while the COS share price and 4DX share price gained over 200% each.

Capital raisings crowded out IPOs in 2020

Nearly 70% of the newbies listed in the fourth quarter as capital raisings by established ASX stocks sucked all the oxygen in the earlier part of the year.

The turmoil caused by COVID-19 prompted many ASX companies to go cap in hand to shareholders to shore up their balance sheets.

If investors can buy discounted shares in a capital raising from established stocks, they would typically shun new unproven companies.

Number of new ASX listings expected to rebound

So, while OnMarket claimed that the December quarter proved to be the best quarter for ASX floats in at least five years, the number of IPOs in 2020 are still lower than most years.

But OnMarket managing director Nick Motteram told the AFR that the momentum in the closing months of 2020 is expected to continue into this year.

“It’ll continue to be strong until there’s an event where market confidence goes out the window or there are some big ones that don’t do well,” The AFR quoted Motteram as saying.

“The difficulty with any IPO is picking a winner and what’s come out of this report is that getting access to as many as possible, putting in a consistent amount and holding for a consistent period is a winning strategy.”

ASX gold stocks to lead IPO recovery

While tech is a hot space and could very well continue to be in demand by IPO investors, the sector that could dominate new ASX listings are gold explorers and miners.

Professional services group HLB Mann Judd was also quoted in the report as saying that it expected gold IPOs to feature heavily.

This is despite the recent pullback in the gold price from record highs of over US$2,000 an ounce. Given that economic uncertainty is likely to remain a big feature in 2021, you can’t write-off the safe haven asset just yet.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended Nuix Pty Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Young couple smiling as they accept keys from their real estate agent for their new home
Broker Notes

Top broker tips REA (ASX:REA) shares as a buy ahead of a ‘very strong result’

Key points Goldman Sachs thinks REA shares are a buy ahead of earnings season The broker believes the property listings …

Read more »

ASX shares upgrade buy Woman in glasses writing on buy on board
Broker Notes

2 ASX shares to buy in the current bloodbath

The fear of US interest rates heading upwards has well and truly wafted across the Pacific, sending the S&P/ASX 200 …

Read more »

Female scientist working in laboratory

Firebrick Pharma (ASX:FRE) is floating on the ASX today. Here’s what you need to know

Key points Firebrick Pharma will debut on the ASX at 12:30 pm AEDT today The company is developing a nasal …

Read more »

A man activates an arrow shooting up into a cloud sign on his phone, indicating share price movement in ASX tech shares
Share Market News

Is the Betashares Nasdaq 100 ETF (ASX:NDQ) an opportunity in this market correction?

Could the Betashares Nasdaq 100 ETF (ASX: NDQ) be a good opportunity during this correction for both the global share …

Read more »

A woman shouts through a megaphone.
Share Market News

2 ASX growth shares to buy in February with 40% upside

If you’re looking to make some additions to your portfolio in February, then the two ASX shares listed below could …

Read more »

2 workers standing in front of a wind farm giving a high five.

ASX shares set to conquer the carnage: expert

It’s been a depressing ride for investors this month as the S&P/ASX 200 Index (ASX: XJO) has plunged more than …

Read more »

mining worker making excited fists and looking excited
Resources Shares

Is the BHP (ASX:BHP) share price a buy in all of this volatility?

Key points The BHP share price has been outperforming the ASX 200 in 2022 Iron ore continues to rally higher, …

Read more »

Business woman watching stocks and trends while thinking
Share Market News

5 things to watch on the ASX 200 on Friday

On Thursday, the S&P/ASX 200 Index (ASX: XJO) fought hard and was able to record a small gain. The benchmark index rose …

Read more »