Will we see more Fintechs list on ASX during 2023?
By Blair Harrison, Head of New Zealand Listings, ASX
The last two years in review
2021 was a year of records in the public markets. The global Initial Public Offerings (IPO) market recorded highs in terms of capital raised and number of IPOs, at US$610 billion and 3,097 respectively (Dealogic). This coincided with US and Australian equity indices recording all-time highs, spurred on by fiscal and monetary stimulus.
There were 240 listings on ASX in 2021 — the highest since the 2007 mining boom — with more than A$13 billion raised and the value of all new listings a record A$52 billion.
2021 has also been referred to as a ‘perfect storm’ for financial technology innovation. The addressable market for fintechs became larger than ever as Covid boosted consumer interest in transactions online. Consumer-facing financial companies rapidly embraced digital models and payment solutions to meet this need. It has been said that the pandemic condensed ‘at least five years of Fintech growth into six months’.
Accordingly, fintechs raised record amounts of capital in the public markets during the pandemic as the fintech sector rapidly matured. Fintech listings were a highlight in 2021 with Pexa (ASX:PXA), Judo Capital Holdings (ASX:JDO), Pepper Money (ASX:PPM) and Latitude Group Holdings (ASX:LFS ) all making the list of the top 10 largest IPOs in 2021.
Then, in January 2022, the ASX had one of the most important listings in its history when buy-now-pay-later giant Afterpay, (that had grown on the ASX to have a market capitalisation of over a staggering A$40 billion) was acquired by Jack Dorsey’s US payments giant Block Inc (formerly known as “Square”). The secondary ASX listing of Block (ASX:SQ2) endorsed the global strength of the ASX technology sector and fintech as a significant contributor to that.
However, the perfect storm of 2021 did not survive beyond March 2022, the markets experienced a downturn and 2022 ended up being the quietest IPO market seen in ten years.
Despite a challenging year, ASX saw 107 new listings in 2022, the resources sector formed the bulk of new listings with almost 60 per cent of all floats. Energy and industrials represented the second and third top sectors, with just 15 floats between the two.
Top 10 Australia-listed IPOs, 2022 v 2021 ($USm)
The outlook for 2023?
There would appear to be a general consensus that, so long as volatility in the markets settles, then IPOs should start to flow again in the second half of this year. The pipeline remains strong and markets appear to be pricing in what are now more certain risks of interest rates and inflation.
The S&P/ASX 200 VIX (A-VIX) is a real-time volatility index that provides an insight into investor sentiment and expected levels of market volatility. The IPO market generally has a negative correlation to the VIX – when the VIX is high, the IPO market pauses. The VIX has been consistently high since February 2022 when Russia invaded Ukraine however, since mid- November 2022 has been at a level much more conducive to IPO activity. Too early to tell, but potentially a good sign for 2023.
Currently there are now more than 60 fintech companies on ASX with a combined market capitalisation of approximately A$100 billion, including six New Zealand companies making up 20% of the total value. This includes: Laybuy, (ASX:LBY); Plexure, (ASX:PX1); Pushpay, (ASX:PPH), Smartpay (ASX:SMP) and Xero (ASX:XRO).
New Zealand fintech Xero has grown to become one of the largest companies on ASX with a market capitalisation of approximately A$11 billion. Xero sits proudly on the S&P/ASX50 and is in the top five largest fintechs of the S&P/ASX All-technology Index. Fellow New Zealand Fintech Pushpay also sits in the S&P/ASX All-technology Index.
New Zealand fintechs are part of a growing, vibrant group of ASX listed companies, significantly impacting the global startup ecosystem. As one of the most innovative countries in the world, we expect this trend to continue and to see NZ Fintechs raising capital via an IPO on ASX again in the not too distant future.
Hear more from Blair Harrison at the FinTech Hui Taumata, where he will be hosting a round table session on how to build a global Fintech from New Zealand.