This article first appeared in The Edge Malaysia Weekly on February 3, 2025 - February 9, 2025

Bursa Malaysia Bhd (KL:BURSA), which operates the stock exchange, is expecting 60 initial public offerings (IPOs) this year, five more than last year.

The market capitalisation for the 60 IPOs is expected to be RM40.2 billion, compared with RM31.4 billion for the 55 in 2024.

This year’s IPOs will come from the healthcare, energy, construction and trading sectors.

It bodes well for the local bourse to have a vibrant IPO market as it adds diversity in terms of investment choices while creating market depth. This in turn attracts investors with various objectives and strategies.

The capital inflows add to market liquidity while companies have an avenue to raise funds for business expansion. Also, the listing of well-known names and major IPOs often get investors excited, creating a positive effect for the local bourse.

Companies listing in a vibrant market can also command better valuations while for Bursa, it derives revenue from the share trading and listing fees. This will raise the bourse’s profile and improve its valuation.

So, what’s not to like about a strong pipeline of companies debuting on the local bourse?

The quality of these IPOs, not just the number of listings in a year, is important.

For one, do the promoters “leave some money on the table” for investors or is the listing effectively part of their exit strategy?

Is there good management in place to grow the business upon listing? Fundamentally, is the business sound with good growth prospects?

Hyped up IPOs that underperform chronically will leave a bitter taste in the mouth of investors, who may be reluctant to invest in future. All it takes is a few bad apples to create a negative sentiment that could take years to repair. The listings of companies from China in the late 2000s that went sour come to mind.

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