IPO markets ready for takeoff in 2025, new report predicts

With improved sentiment from recent mega listings and the stabilising of interest rates, there is a new level of optimism for the ASX that will finally see the IPO market take off in 2025, as predicted by a new report from global law firm Herbert Smith Freehills (HSF).

“The Guzman y Gomez, DigiCo REIT and Chemist Warehouse success stories have provided hope for a return of listings at scale”, comments Philippa Stone, partner at HSF.

“There is no doubt that heightened geopolitical instability and global tensions, including the potential for a global trade war, present challenges. But despite these economic uncertainties globally, there has been a change of mindset from the series of successful IPOs and improved investor sentiment.

“With the world adjusting to a new US President and a Commonwealth Government election slated for the first half of the year, we again expect that the primary IPO window will be September to early December 2025”, added Philippa.

IPOs in 2024

The report — Ready for Takeoff: The Australian ECM Review 2024 — looks back at the activity from 2024 and provides a comprehensive analysis of the key trends, themes, and predictions that will shape Australia's equity capital markets in the year ahead.

HSF partner Nicole Pedler said, “Whilst IPO activity in 2024 continued to be low by number of IPOs, the volume of capital raised by IPO in 2024 increased on 2023 and was the highest in a number of years, with some very significant IPOs undertaken.”

A focus on resources

The report’s data found that the resources sector continued to be a major contributor to activity in Australia’s equity capital markets. Just over half (54 per cent) of IPOs by number in 2024 were undertaken by resources companies, accounting for 39 per cent of the total capital raised by IPOs for the year.

HSF partner Paul Branston comments, “The materials sector was once again the dominant sector for new entrants to the ASX. IPOs were spread across a number of critical minerals, including strong representation of gold (30 per cent), copper (23 per cent), and lithium (23 per cent).

“Australia’s capital markets have shown that they are a reliable source of capital for resources companies — despite volatility in commodity prices, investors are prepared to support materials exploration and then provide the equity required to fund further development.

“We also saw metals and mining maintaining dominance in the secondary raising landscape, both by number of transactions (100) and total capital raised, which reached nearly A$5 billion”.

A positive shift in secondaries

The report also looks back at secondary raisings in Australia, which experienced notable shifts in 2024 as compared with 2023.

HSF partner Alex Mackinnon explains, “With 82 transactions in our data set raising A$17.54 billion in 2024, the secondary market remained buoyant, significantly outperforming 2023.

“M&A was a key driver of secondary raises, with about 23.8% of transactions in 2024 funding M&A activity — an increase from 17% the previous year.

“It was unsurprising to see the market supporting capital raisings to facilitate M&A transactions and we expect this trend to continue into 2025”.

Pent-up demand and private capital

Looking forward, the report predicts that built-up demand will likely be met with market supply in 2025, which should drive up IPO activity.

Tim McEwen, partner at HSF, explains, “While there continues to be some wariness in relation to value, there is rising demand from investors, and a pent-up supply from companies and their vendors and founders who want to IPO.

“Anecdotally, we have received more inbound IPO inquiries than we have had in recent years, and we have heard that others in the market are seeing the same trend”.

The report considers that the availability of private capital will continue to present a challenge to public capital markets as an alternative to the IPO process.

HSF partner Michael Ziegelaar said, “The combination of availability of significant private capital, reduced regulatory burdens, and the option to have bespoke deal structures and direct negotiations with investors, has made private capital an attractive alternative to the IPO process in Australia, allowing companies to stay private for longer.

“However, private capital also presents opportunities for public capital markets through IPOs of existing businesses held in private equity and venture capital funds — many funds are reaching end of life and need to realise their investments.

The sale of such businesses to already-listed companies, could help expand the value of those listed companies on the ASX and support secondary capital raisings”.

Regulator support needed

While the report expects to see the IPO market build on last year's momentum, HSF highlights the need for regulators to play a more active role in encouraging its success. It is pleasing to see ASIC is considering these issues too, as noted in its recent discussion paper, ‘Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets’.

Philip Hart, partner at HSF, said, “The regulatory focus should be on increasing the certainty for the company and investors once the IPO is launched.

“Through proactive engagement with companies looking to IPO, including pre-vetting prospectuses before lodgement, ASIC could significantly improve disclosure by more clearly addressing focus issues such as ESG, greenwashing, and financial disclosure earlier in the process. Additionally, thought should be given to shortening the timetable between the launch of the IPO and the trading of shares.

“This could help close the gap between the confidence of the IPO supply side and demand side, ultimately supporting a more robust IPO market”.