New research from KPMG Corporate Finance suggests that only half as many dot-com companies will float in the current financial year as they did last year.
The KPMG 1999-2000 capital market survey showed that the last financial year included a massive 54 Internet-based businesses listing publicly on the ASX, raising a total of $900 million in funding. This was almost eight times the number of IPOs in the previous year, which raised around $250 million in funding. According to KPMG, the trend will not continue.
After the investor backlash in the fourth quarter of 1999/2000, share prices plunged and investor confidence in Internet-related companies dropped considerably. The report shows that two-thirds of newly listed Internet companies completed the financial year trading below their issue price.
This poor performance has led KPMG to predict that the number of dot-com IPOs in the current financial year will be sliced in half, raising around $500 million of funding. Julian Vella, national head of KPMG Corporate Finance, believes that investors have grown wiser and more weary of Internet-related companies that do not have a sound business model when sourcing funding.
The survey also suggested that Net-based companies made up the best and worst performing companies of the entire Australian market. Seven of the worst 10 performers were dot-coms, as were six of the best 10. The report highlighted the extreme volatility of the market, with companies like eisa trading at discounts of more than 80 per cent of their issue price, and Powerlan recording a gain of 600 per cent for the same period.
Vella expects such gains and losses to not be as prevalent in the current year, as fewer dot-coms apply for public funding and more traditional methods of valuation and pricing are favoured by investors. He predicts that the market will become a "harsher judge" of new dot-com's prospects.
