The postponement of what was to be the biggest IPO of the year in the A$1.3bn Valemus float has left lawyers with a new perspective on the fragility of the market. The postponement would have come as a particular disappointment to Valemus advisor Clayton Utz, which reportedly had as many as 18 partners advising on the deal.
 
“The best way to describe IPO activity at the moment is that it is very difficult because of the state of the equity capital markets. Local and international markets are quite volatile and that was the reason for the Valemus IPO being pulled last week,” said AAR Co-Head of Equity Capital Markets, Robert Pick. The Valemus IPO would have been the second largest IPO after the Myer IPO, since the market re-opened last year.  It would have also been the first significant float from a non-retail focused industry.
 
The market might have re-opened on a high last year with some strong deals such as the Myer IPO, but the performance some of those deals over the last six months has been disappointing. According to Pick, this has led investors to become more cautious when backing IPO deals at the prices issuers want.
 
Despite the uncertainty surrounding IPOs, lawyers are seeing a resurgence of trade sales activity, including private equity deals. However, Mallesons partner Shannon Finch says that trade sales have their own challenges in current market conditions, including availability of financing and conservative pricing from bidders and regulatory hurdles. “There's no clear winner   at this stage - it's a case by case thing.  Certainly, we are seeing trade buyers more willing to make acquisitions which give a seller another potential exit route but we would not say that is a significant reason itself for the small number of IPOs this year - market conditions are the main driver,” said Finch.
 
In the short term, lawyers are predicting good conditions for IPO activity so long as the market remains stable over the over the next three to five months. While most IPOs are mainly small to medium sized speculative deals, generally from mining exploration, IT and pharmaceutical companies, Australia still has an open market, which is key to the future for IPOs in the domestic market.  “The future for IPOs is still positive - it's just a case of not being able to currently predict when it will all happen,” said Mallesons partner Michael Barker.