Redox shares close down on debut after Australia's largest IPO of 2023

By Lewis Jackson and Scott Murdoch

SYDNEY (Reuters) -Australian chemical distributor Redox's shares closed below their issue price as the country's largest initial public offering (IPO) this year disappointed on its Australian Securities Exchange debut on Monday.

The firm raised A$402 million ($267.29 million) by selling its shares at A$2.55. The shares closed down 4.9% at A$2.43, underlining a lack of investor confidence, analysts said. The broader benchmark S&P/ASX200 index finished 0.6% higher.

The tepid performance will temper hopes that a strong performance by Redox could help revive Australia's flatlining equity capital markets.

"It doesn't bode well," said Jun Bei Liu, who manages the A$1.2 billion ($796.92 million) Tribeca Alpha Plus Fund. "We all thought it would be a pretty good IPO. Ultimately it shows lack of confidence among investors."

New share sales this year have fallen to a 14-year low, Refinitiv data showed.

There have been $26.4 million worth of IPOs in Australia this year, not including Redox, down from $493.1 million at the same time last year, the data showed.

The 94% decline in Australian IPOs outpaced the 28.5% fall in issuance valuation that occurred across the Asia-Pacific region, including Japan, in the first half of the year.

The IPO gave Redox a A$1.3 billion market capitalisation and its shares were priced at the low end of the range flagged to investors when the bookbuild launched in early June.

Domestic airline Virgin Australia is expected to raise A$1 billion later this year, most likely in November, which would be the largest IPO in Australia in nearly three years.

VanEck Australia head of investments and capital markets, Russel Chesler, said there was a backlog of potential IPO candidates in the second half of 2023 but financial market uncertainty was stopping those deals from going ahead.

"If Virgin goes ahead and is a success that will be what pushes others into the market," he said.

($1 = 1.5058 Australian dollars)

(Reporting by Lewis Jackson and Scott Murdoch; Editing by Jamie Freed, Christopher Cushing and Himani Sarkar)