GYG IPO may be a turning point for Aussie market

GYG’s initial issue was closed to the public and largely involved selling shares to existing financiers and franchise owners. — Bloomberg

SYDNEY: After two years in deep freeze, Australian investors will be looking for signs the initial public offerings (IPOs) market is thawing as fast-growing Mexican restaurant chain Guzman Y Gomez (GYG) serves up the country’s biggest IPO in 11 months.

The Sydney startup puts up A$335.1mil (US$223.4mil) of new stock, about one-sixth of the company, for trading yesterday.

In its listing prospectus, the company forecast a second consecutive net loss for 2024 but a profit in 2025 and hopes investors back its plans to match the current Australian store count of McDonald’s in 20 years.

GYG’s initial issue was closed to the public and largely involved selling shares to existing financiers and franchise owners. How the shares perform will send a signal about broader sentiment after high interest rates and inflation squashed demand through 2022 and 2023.

Australian listings collapsed after a record 2021 as pandemic stimulus payments ended and the central bank raised interest rates to slow inflation. In 2024 so far, Australia has raised just A$98mil in IPOs, the second-lowest June half in more than a decade, according to LSEG data.

“GYG will be a bit of a bellwether,” said Campbell Welch, an adviser at Novus Capital who ran a small IPO for health services provider Freedom Care in November, one of 32 new listings in the country in 2023, compared with nearly 200 in 2021.

“It’s still pretty tough to raise money but some of these things look like they’re resolving themselves. I don’t see why it can’t succeed.”

A prospectus filed in May generated rolling headlines about GYG’s target of opening at least 30 stores per year from 183 in Australia currently – a rate it has achieved just once, in 2023 – and about its omission of store lease liabilities and share-based payments from earnings projections. — Reuters