2025: 
Predictions

2025 predictions – and a request

IPOs 1

There will continue to be an industry focus on the state of the IPO market as an outsized indicator of the health of the Australian capital markets. While we would like to see the IPO market build on the momentum from last year, we note that another appropriate indicator of the health of capital markets is the capital raising activity in the secondary markets, which, as we have noted in ‘2024: Secondary raisings by the numbers’, reflects positively on the market with growth in 2024 as relative to 2023.

For IPOs, we still consider that there is pent up demand from investors and pent up supply from companies and their vendors and founders who want to IPO, albeit there remains wariness from both sides in relation to value. Anecdotally, we have more inbound IPO inquiries than we have had in recent years and we have heard the same from others. With the growing availability of private capital as an alternative, we consider that investors and importantly regulators need to play a more active role in encouraging the IPO market. Which brings us to our request, ASIC (and the Commonwealth Government to the extent that ASIC considers that it requires legislative change) and the ASX should be actively considering the various suggestions put to them by capital markets lawyers, investment banks, fund managers and potential IPO companies about how the IPO process could be made more efficient. This is particularly so, given ASIC’s focus on the changing dynamics between public and private markets noted in its Key issues outlook 2025.

ASIC in its discussion paper Australia’s evolving capital markets released on 26 February 2025, notes that it does not see regulatory settings as the dominant factor driving listed equity activity in Australia, but there may be opportunities to adjust to improve the attractiveness of our markets. ASIC also notes that it is exploring opportunities with the ASX to refine the listing pathway and listing rules.

We suggest that the regulatory focus should be on increasing the certainty for the IPO company and the investors once an IPO is launched, without impacting disclosure (the key investor protection), by:

• pro-active engagement with IPO companies including pre-vetting prospectuses prior to lodgement – ASIC could achieve significant improvements in disclosure having regard to its focus issues such as ESG, greenwashing and financial disclosure by engaging with the IPO company and its advisers earlier in the process. Improvements in the quality of disclosure would assist the market; and
   
• significantly shortening timetables between the launch of the IPO and trading of shares.

To the extent that ASIC requires more funding or expertise to undertake pro-active engagement that should be sought.

Improvements in the process will not outweigh the need for appropriate market and economic conditions and good quality IPO candidates but it should assist in closing the gap between the confidence of the IPO supply side and demand side.

From an investor and IPO selling shareholder perspective greater consideration should be given to supporting IPOs with a smaller number of shares being offered in the IPO and recognising that future sell downs once the company has been listed for a period may be a good compromise and bridge the concerns that investors may have in comparison to the information that they have from already listed peers.

IPOs 2

With the world adjusting to a new US President and a Commonwealth Government election in the first half of the year, we again expect that the primary IPO window will be September to early December 2025. Overall, we consider that this being the most popular timing for IPOs is a structural reality of the Australian market. If Australian inflation and interest rates ease as currently expected, we expect that the start of the September IPO window would be a good time to launch an IPO to ‘beat the rush’. We are optimistic that the large IPOs which were successfully undertaken last year will embolden others to bring their company to market in 2025.

Private capital

As noted above in IPOs 1 we consider that the availability of private capital will continue to present a challenge to public capital markets as an alternative to the IPO process and as a buyer of existing listed companies. However, private capital should also present opportunities to public capital markets, firstly through IPOs of existing businesses held in private equity and venture capital funds which we consider to be a potentially significant part of the IPO supply side (in particular given the well publicised fact that a lot of funds are reaching end of life and need to realise investments), and secondly through the sale of such businesses to already listed companies. The latter still assists with the expansion of the value of the ASX and supports to secondary capital raisings – see further below. It also means PE and VC vendors can deal with a trade buyer who may feel more comfortable valuing an asset rather than capital markets investors.

Secondary markets

We expect to see an increase in secondary capital raisings throughout 2025 albeit with a bias towards the period after the Commonwealth Government election and dependent on the easing of the inflation and interest rate cycle.

These secondary capital raises will be driven by:

• M&A from listed companies supporting the expected growth in M&A generally in 2025 with listed companies being more confident in their outlook. The potential to acquire assets from private capital may provide good opportunities for disciplined M&A that will be supported by shareholders, although we note that existing shareholders will need to be provided with confidence around the valuation and quality of such acquisitions; and
   
• an increase in confidence for existing listed companies to raise capital and invest in growth. We had noted in our 2024 predictions the potential for balance sheet support capital raisings and the right sizing of capital structures. Most listed companies balance sheets held up well through 2024 without the need to raise capital, however, in 2025 the opportunity to undertake more positive capital raisings may arise.

Sectors

We expect the sectors which will show strength in 2025, both for secondary raises and IPOs, to be materials (given the nature of the ASX) but with a focus on those which support the energy transition, energy stocks and healthcare/pharmaceuticals, given some of the broader themes that are playing out across the Australian economy. That said, strong companies in other sectors who have a good ‘equity story’ as they conduct their raise should find strong support from Australian investors.