Public markets slump as private takes over: AUSIEX

New analysis from trading platform, AUSIEX, found up and coming Australian businesses have shifted away from public equity markets amid amid increasing investor interest in private markets.

Patrick Salis, AUSIEX chief executive, said public equity markets have been underperforming recently in their role to transform Australian businesses from “start-up to major economic contributors” as the main method of raising capital, providing liquidity and price transparency for companies and investors.

“One measure of whether equity capital markets are performing this role effectively is whether public company listings are growing in line with the growth in company and capital formation,” Salis said.

“ASIC figures show Australians are starting new companies at a solid clip of 4.5% new registrations a year.  Yet, the number of companies listing on public markets is falling. In the five years to 2023, there were just over 160 fewer publicly listed companies compared with 2017.”

Salis said the economy is undergoing key changes that could allow businesses to better leverage Australian public markets.

“One is the well-documented desire from governments to re-engineer the Australian economy away from fossil fuels and towards green energy via the Future Made in Australia Act,” he said.

​“The second and arguably less widely understood shift, however, is the recent and urgent emphasis toward bolstering Australia’s defence and national security requirements in the face of global challenges.

​“These initiatives are a source of real goals and real projects. The AUKUS agreement, for instance, commits Australia to $368 billion of projected expenditure into the mid-2050s. A raft of other programs announced focus on future-orientated industries such as energy transition technology, artificial intelligence, cyber, hypersonic capabilities and quantum computing as well as re-homing other advanced manufacturing capabilities to rebalance our economy.

“These changes have created an increased willingness to find ways to deploy significant capital into Australian industry. Listed equity markets are one avenue through which they could be pursued.”

AUSIEX said industry associations could focus some of their resources and relationships with government and key stakeholders to build awareness and develop tools to attract local or offshore companies to list in Australia, through better understanding of the current and future economic environment.

“Australia has a strong and mature equities market; however, it may be argued that it does not have a ‘mission fit’ corporate bond market.

“Government and regulators have been slowly developing the local corporate bond market, with ASX as a leading participant in the process. However, the fact that ASX itself was recently unable to use its own platform to raise debt shows there is still work to be done,” Salis said.

Salis also indicated the Australian Securities Exchange (ASX) should look to revive its focus on innovating and improving its infrastructure with the help of technology, in addition to the increased focus on regulation and compliance.

“If Australian capital markets do not innovate at the rate of their global peers, who are also competitors, they risk becoming technologically moribund and uncompetitive with opportunities simply going to other markets,” he said.​

“Stakeholders here need to work together to remove obstacles to market innovation and improve the utilisation of Australia’s public capital markets. This would support growth and wealth creation for future generations of companies and investors.”