Company Interview / 2025 may be the year for IPOs

Key points:

Craig Mason from Complii (ASX:CF1) states Australia's IPO market is slow this year. Interest rate increases impact company valuations and share prices. Larger companies attract capital, while smaller ones, especially tech, struggle to gain attention and investment.

Craig mentions Guzman & Gomez (ASX:GYG) as an example of a rerated IPO. He notes some green shoots, but high investor scrutiny lengthens the path to market. Smaller companies face challenges in raising capital in the current financial climate, but there’s optimism for 2025 with expected rate cuts.

Craig highlights demand for quality in energy, mining, and large industrial sectors. Tech companies, unless well-capitalised and profitable, face investor scepticism. Complii sees some positivity towards the future but acknowledges the tough 12 months for many market segments.

Full unedited transcript below:

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Well, Australia's IPO market has been undeniably slow this year, with interest rate increases contributing to a general decrease in company valuations and share prices. Executive chairman of Compli, Craig Mason joins me to explain. I guess just what we're seeing here in terms of some of the appetite for equity capital raising. Yeah, I think the challenge is really at the moment is that there's not a lot of capital flowing into the smaller end of town. There's still, you know, quality capital coming into the larger industrials and the larger banking and resource type sector. But the smaller end of town is still struggles to gain attention from most investors. Um, and obviously a lot of those investors at the smaller end of town are in debt capital recyclers. So it sort of becomes a self-fulfilling momentum. But I think, you know, some of the issues we see across the market is all those companies do need capital. And so there's a lot of choice. So it's very difficult at the moment for some of those smaller companies, especially tech type companies, to attract any

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capital into them at the moment. It's interesting. We were just talking with my previous guest about Guzman Gomez, which was, you know, such a hot IPO and now people are starting to rerate. What do you think overall in terms of the Australian IPO market and whether or not we're seeing some significant green shoots here? Ah, look I think we're seeing some green shoots. But again the path to market is is a lot longer now. And the scrutiny and the investors appetite is is, you know, there's much more diligence around it. So given that most smaller companies and most companies have, you know, want to get to a listing event, but unfortunately have struggled in the current climate to raise capital. The reality is that, you know, very few will get to market in the near term, but there is opportunities coming, I think, you know, in relation to interest rates. So some stability around the interest rates, some improvement. You know, downward movement in interest rates will actually give some people more confidence into the market and allow it to step forward a little bit. But at the moment little green shoots. But, you know, investors are being very

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specific about what they're prepared to look at. Does that sort of mean maybe 2025 could be a better year for IPOs, given we are expecting to see rate cuts? Yeah. So and that's what we're seeing from our clients as well. Obviously you know comply our corporate activity and our business model is all around cap raising and our clients cap raising. And so what we are hearing from the majority of our clients is, you know, there's a lot of pent up demand to to look to IPO, to look to cap raise. But until there is some change in the climate, the financial climate and the and interest rate climate, it's very difficult to take these companies to market. But again, that's a positivity thing for 2025 because that means when it does come back on, it can come on quite quickly. Well, what sort of main areas are attracting capital? We know we're so heavily resourced based in Australia. Is it the miners? It is the energy stocks. Look it really is. And you know we've we're one of the major providers of technology to cap raising. And and in the first half of this year you know we I think we raised some 5.8 billion across our platform, but it was in very few

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deals in very large companies where previously, when we saw those sort of numbers, it would have been across a plethora of smaller companies, smaller IPOs and cap rises. So there is a shift specifically to quality at the moment. But again, as I said, we're seeing some positivity towards the future. But it's still, you know, very, very early that what are you seeing in terms of demand and appetite for tech though, because it seems a lot of the really good tech companies go to Silicon Valley. Yeah, the challenge for tech and we're a victim of this as well, is that anything we've taken its name right at the moment, unless it's commercialized, well commercialized, well capitalized and making a profit, people are a bit jaded from it. And the market for the last two years is, you know, we see ourselves as a fairly positive story in that space. But the majority of those companies are always chasing capital. They're always under capitalized, under resourced, and a long way from profitability. So it's not really the most positive sector at the moment. Well, speaking of profitability, we just wrapped up reporting season. What was sort of your key takeaway or the winners or losers? Yeah. So interesting. I won't

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name specific names, but what was interesting to see was that even those who put out reasonable results still got marked down. Um, because it's just hard out there. The expectation is greater than than than the output. And it's been a challenging 12 random months for a lot of segments at the moment. And a lot of investors have, you know, gone on that journey as, as the broker dealer firms and so forth. They've gone on that journey of pain for a long period of time. So, so I think some companies got marked down based on their results when the results were actually quite good. Um, but at the top end of town, you know, the results still continue to perform. And you look at the big banks and you see their performance and their valuations and so forth. That's where people, you know, it's a flight to equality at the moment. In that phase. Did you look very closely at some of the retail companies? Because when you're looking at forward guidance as well, that consumer sentiment being hurt really seemed to dent the forward looking growth. Look. It does. And I think that's part of the whole uncertainty in the economy at the moment. And the noise about the R-word and what's going on with interest rates. So I think anything that's exposed

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to both inflation but also recessionary problems is a big problem. Well, you also a listed company tell us how your results were. Yes. So so look, you know we're in that fintech space. Um, but we are you know, we have the triple whammy in our business from the point of view of our client bases to broker dealer and financial services industry. Most of our shareholders, major shareholders are also either principals or investors who invest in that space. And the market generally has been dampened. But what you know, we took some decisions in September last year to rightsize our cost base, be reflective of the market conditions, preserve capital and ultimately bring more capital on the balance sheet. So we're really, you know, a lot of the loss in our result was one off write downs and to clean the decks from from previous transactions, etc.. But you know, the headlines are our IRR continued to grow our capital whilst it was, you know, reducing. And we've done announced a proposed transaction to divest one of our businesses, which will significantly bolster

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our balance sheet. So, you know, come October, providing that goes through. Um, you know, we'll have a very, very strong balance sheet and a very strong forward looking business. The business we're exiting was a loss making business. So it's not a significant, um, impairment to us from the point of view of it improves our cost base. And it has a long term relationship which allows us to not only grow our business in partnership with them, but actually turning a loss into a revenue line. So from a forward point of view, we're probably unique. Um, we don't need to raise capital. We we will have a very strong balance sheet. We have a, a class client base, um, in the financial services sector. And, you know, when we talk about IPO or cap raising green shoots, that's at the heart of our business. So our primary markets business and our our corporate highway business, if there's positivity into 2025, that's when our market, our business really escalates quite quickly, and being cash strong, puts it in a very strong position for Ozu's viewers, who may not know much about company. Just sort of tell us what your elevator pitch

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would be. Yeah. So look, our core is that we are the compliant set of hands for the cap raising and and unlisted marketplace in Australia. So, um, we have other than the bulge bracket firms, we have about 80% of all stockbroking firms and financial services firms using our platform for their capital raise compliance, secondary market, um platform trading for unlisted, etc.. So so we're right at the heart of that cap raising market, and we sit right in the middle of our of our broker dealer firms. And when you look at the performance of your share price, I'm sure most CEOs, in fact everyone I ask this question two tells me that they think that they're not fair value. But what are you seeing in terms of market trends? Uh, look, so I think the answer is that, um, micro caps and small caps are unloved right at the moment. Uh, no one wants to have any interest in them. They tend to be what I refer to as lobster pots. They're really, really easy to get into, but to get ahead of. Um, but, you know, a lot of good micro caps and small caps get tarred with the

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general segment. Um, because there's always this view that micro caps are always putting their hand out for money, especially in the fintech space. So that's where, you know, we're trying to differentiate ourselves by saying not only do we not need capital, not only do we have a strong client base and a strong revenue line, but we are unique in what we do. We don't have competitors. So from a pricing point of view with our stock, it's quite difficult because there's no competitor. Um, it's hard to measure the value of our, our business model based on its IRR and the market segment. But, you know, in a very positive market, when that starts to move again, we're in a nice place. Um, a lot of the other micro caps and small caps, it's difficult because, um, raising money is not possible at the moment. Even the unlisted space trying to go to IPO, there's no money for it. So I think, um, our company generally gets tarred with the entire market in that space.