Professional services giant Deloitte is predicting a surge in smaller technology firms seeking to list on the Australian Stock Exchange this year.
Deloitte’s annual IPO report for 2015 found that the stock market’s appetite for risk and investing in high-growth businesses had increased, providing tech start-ups with a viable alternative to venture capital funding.
Citing a Mergermarket intelligence brief, Deloitte said the market was more prepared to “embrace young and sometimes less proven tech businesses”.
“Currently, interest is brewing in tech stocks and other emerging sectors with export potential, especially those outside the mining sector that offer investors a substantial return rate,” the report’s authors wrote.
Deloitte found that technology, media and telecommunications raised $1.7 billion in equity in 2013 and 2014, with average share prices up 12.9 percent across the category for 2011 through to 2014.
The report also found that a trend toward reverse listing through acquisitions of resources companies was helping drive tech company IPOs. Smaller tech companies accounted for nearly half of 30 reverse listings that the ASX recorded in 2014.
“These deals – such as InterMet Resources’s acquisition of One-Page in October 2014, and AO Energy’s acquisition of Reproductive Health Science in April 2014 – show that many companies value having the prestige and liquidity of a public listing," the report stated.
"It also shows how investors who once were happy to be invested in the resources sector are now seeking exposure to other sectors."
Wayne Arthur, founder of Australian start-up SkyFii, which listed on the ASX last November, said opportunities for local tech minnows to access venture capital were more restricted than in other markets like the US.
"I think we will see more tech companies taking the route we’ve chosen. It just seems to be easier to access capital that way,” Arthur said.
He said investors were attracted to the idea of listings, as they had a better chance of exiting with their capital.
“From that perspective it decreases the risk a little bit,” he said.
The benefits of listing could go beyond access to capital. Arthur said the listing process was testing and difficult but ultimately worthwhile, as it had helped with SkyFii’s global acquisition strategy.
“Having been through it and being in the position that we are today it’s definitely something that I would do again. I think we did it for the right reasons and it’s starting to prove that it was the right decision for us,” he said.