It has been recently noticed that the market for new company listings in Australia is witnessing a downturn as investors are taking a cautious stance towards initial public offerings. This year, many planned major floats were noted to be cancelled in favour of trade sales and it was also noted that a lot of negativity prevailed after few listings on ASX. In fact, it has been estimated that the amount raised through IPOs this year is at $1.5 billion, which is lowest in last five years.

While the backdrop for IPOs remains dry, financial planning platform Netwealth has taken up a lot of attention these days with the founders predicting a good future for artificial intelligence and data mining for the fast-growing platform market. Netwealth particularly provides an investment and superannuation platform and the group is expected to have a listing worth $900 million later this year. Netwealth is a provider of software and financial products to non-bank aligned financial planners, and has funds under management, administration and advice of $15.5 billion. Netwealth’s first office was opened in 1999 by Michael Heine (one of the founders) and it was expected that the break-even would take three years given the growth opportunities of the platform. However, it took a significant time to generate cash. The group has now appointed Credit Suisse and UBS to manage its IPO which is expected in November. Further, the IPO price range has been set at between $3.10 and $3.70 per share, with an aim to raise about $256.4 million for a market capitalisation. Final pricing is said to be determined at a bookbuild on October 19.

It is worth noting that Netwealth will be competing with financial advisers including Hub24, OneVue, and Praemium, which have a considerable portion of the market share in adviser business, while Netwealth accounts for 1.7% of that market.

The market expects Netwealth’s FY18 revenues to be $82 million, and earnings before interest, tax, depreciation and amortisation of $40 million, while the group aims to grow funds management business as opposed to administration business over time.The group has also made a legal provision of about $1 million considering the issues relating to claims for poor advice and selling products that it was not licenced to do so.

It will be worth watching the developments on this float going forward considering the outlook of the platform industry.

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