The IPO market has thrown up some interesting businesses in 2016 and judging by some of the share price performances so far, it would be fair to say that investors have been treated to some hits and misses.
Investors have naturally been quite cautious towards companies with limited track records and have marked stocks down heavily when it appears prospectus forecasts might be a little too optimistic.
Nevertheless, a number of IPOs have performed extremely well since listing, including:
ABUNDANT FPO (ASX: ABT)
Abundant is a micro-cap company that listed in April 2016 at an IPO price of 20 cents per share. Shortly after listing, the shares skyrocketed to a high of $1.01 per share but are now trading at 80 cents per share – still a massive gain of 300%!
The company operates in the agricultural sector and develops seeds to grow vegetables that produce better yields and are more drought, temperature and disease resistant.
Investors clearly see the company as having a competitive advantage in a lucrative market but it is important to remember that Abundant is yet to deliver its first result as a public company and is still a tiny player in a market dominated by a small number of global power-houses.
WiseTech Global Ltd (ASX: WTC)
The freight and logistics software company listed at an IPO price of $3.35 in April 2016 and has since surged 60% to $5.36 per share.
It appears WiseTech Global has already become a favourite stock amongst tech savvy investors and now boasts a market capitalisation of more than $1.5 billion. One of the main reasons investors really like the stock is because it has a key competitive advantage over other providers as it offers a single, integrated platform that enables key logistic transactions to be executed from one place.
The company currently has 19 of the top 20 global logistics service providers as customers, but investors should note the company only expects to post revenue of $135 million and net profit after tax (NPAT) of around $25 million in FY17.
This means investors buying the shares today will have to trust the company can deliver exceptionally strong growth for a number of years to come.
Afterpay Holdings Ltd (ASX: AFY)
Afterpay shares have taken a breather over the last few trading sessions but have still managed to rise by 115% from the May 2016 IPO listing price of $1 per share.
Afterpay is a technology-driven payments company that enables retail merchants to provide their customers with a 'buy now, pay later' service that does not require interest repayments from the end customer. This has, unsurprisingly, become popular amongst retail shoppers and the company has rapidly increased the number of retails merchants it operates with to more than 300.
Afterpay is showing encouraging signs of growth on a number of key metrics, but it is still unclear how this will translate into earnings and the price action over the last few days suggests investors should wait until the company releases its financial results next month before taking a stake in the company.
