Investors avoid small-cap IPOs

The lethargic initial public offering market surrounding small cap stocks is continuing from last year as investors shy away from the challenging market conditions, a leading IPO business accountancy firm says.

Partners at the Perth-based arm of HLB Mann Judd, which handled eight floats last year, say only one IPO is on their books so far this year, with planned market listings well down on last year.

Five companies have come on to the boards this year, including WA-focused uranium explorer Zeus Resources which has halved in value since listing last week.

The challenging conditions are a continuation of last year, with just 46 IPOs completed compared to 104 in 2011. Of the companies that listed last year 48 per cent recorded losses.

Speaking at an IPO breakfast yesterday, A1 Consolidated Gold chairman Ashok Parekh said part of the blame for the lack of confidence in the IPO market should fall on the Federal Government, which had created uncertainty through the mining and carbon tax.

Mr Parekh, who also chairs Macphersons Resources, said the high labour cost environment in Australia also contributed to the lack of investor faith in new listings.

He said many small cap companies had been looking at overseas investors to fill the void as the local markets dried up.

HLB Mann Judd partner Norman Neill said alternatives such as backdoor listings and merger and acquisition activity would become increasingly common this year as private companies looked for alternatives.

However, Mr Parekh said many managers and directors of small caps were too concerned about their own personal salaries to agree to mergers, and were not focused on shareholder wealth.

Despite the doom and gloom, NSW-based Indoor Skydiving Australia, which listed on January 18, has doubled in value from its 20¢ listing price to close at 40¢ yesterday.

Other companies to list so far this year include Perth explorer Cott Oil and Gas, NSW energy and water conservation company Ecosave Holdings and Singapore-based oil and gas contractor Oilfield Workforce Group.