A slump in sharemarket floats is depriving West Australians of the opportunity to invest in mature, home-grown companies.
Over the coming months, the Australian Securities Exchange in WA will lose two of its biggest non-mining listings, education provider Navitas and car dealer Automotive Holdings Group, to agreed takeovers.
Debt-management group Pioneer Credit could well follow after revealing last month it had attracted a number of takeover proposals.
With a combined value of $3 billion, Navitas and AHG will leave a big gap in a WA market still lacking sizeable investment options for local investors seeking to diversify out of the State’s staple mining listings.
The Navitas offer will release nearly $2 billion of cash into the hands of its shareholders, many of them West Australians looking to redeploy the proceeds close to home.
But excluding Navitas and AHG, there are just six other non-mining entries in Deloitte’s top-50 WA listed companies. Wesfarmers tops the rankings, with the Bunnings-linked BWP Trust at No.10, followed by Austal (20), residential developer Peet (33), Cedar Woods Properties (34) and mortgage broker Australian Finance Group (44).
And there’s no relief coming from new initial public offers.
The pipeline is empty.
All up, according to data from audit and advisory firm HLB Mann Judd, just a single WA-based company has floated to the ASX this year — African Gold, which raised $4.5 million in an initial public offer on the way to listing in mid-February.
Since Pioneer joined in 2014, industrial floats have been few and far between, outside of family-owned precision engineer VEEM in 2016.
A couple of attractive WA companies are said to be looking closely at an IPO, but there’s no guarantees they’ll ever get to market.
As always, investors are looking for strong operating businesses with an earnings history, good management and a familiarity with modern corporate governance practices.
There’s no doubt volatile markets over the past six months as well as the uncertainty that accompanies a Federal election may have deterred some business owners from pursing a float this year.
However, anecdotal evidence suggests owners are also baulking at what they see as the onerous regulatory burden that comes with a public listing.
Consider Navitas’ co-founder Rod Jones, whose involvement in the Navitas buy-out was partly influenced by his frustration at increased compliance and governance constraints he says have prevented the company from reaching its potential.
And it’s not as if business owners seeking to realise value from their companies can’t go elsewhere.
A full or partial sale to one of the growing number of cashed-up private equity groups scouring Australia and the globe for new investments is sometimes preferable to the headaches and scrutiny that come with a listing.