Given the rate at which the ASX is shedding listed stocks, either due to merger, takeover or business failure, cynics may laconically pose whether the last listed company could please remember to turn the lights out.
Interestingly, the shrinking of the ASX has witnessed a corresponding rise in private capital.
As well as lacking the diversity and depth of global share markets, especially in the United States, the local bourse has been shrinking for some time, with the ASX boasting 70 fewer listings (2,121) in December 2024 than a year earlier.
It’s not just takeovers and company failures that are causing the ASX to shrink.
In recent years we've seen progressively fewer IPOs and secondary capital raisings. The net effect has resulted in Australian investors looking to overseas share markets for the growth and diversity they can’t get locally.
Where have all our best stocks gone?
Admittedly, small-caps that go bust and leave the ASX don’t move the market. However, every time cashed-up private equity takes out a quality, listed large-cap, the ASX continues to get smaller.
According to the research by Dealogic, quality stocks that have been delisted in the last three years, due to takeover, have reduced the market value by $175 billion. By comparison, newly listed companies are generally smaller than companies that left after being taken over.
For example, newly listed entities that joined the ASX over the same period had a market cap of around $70 billion.
Companies that have left the ASX in the last few years include some of the main board’s former star performers.
Here are some names that might have been removed from your share portfolio [and the ASX] through no fault of your own:
Adbri, Afterpay, Allkem, Alumina, Altium, AusNet Services, Blackmores, Boral, CIMIC, Crown Resorts, CSR, Link, Newcrest, Oil Search, OZ Minerals, Pendal, Spark Infrastructure, Sydney Airport, Ausnet Services, Vocus Group, TPG Telecom, Tilt Renewables and Infigen Energy.
Three infrastructure jewels left on the ASX
Given the near-certainty of income they offer and strong defensive earnings during down markets, it’s hardly surprising that large overseas suitors and private equity are permanently on the scrounge for infrastructure stocks they can pick up cheaply.
Unlike most regular stocks, these infrastructure stocks also have inflation-linked contracts which allows them to pass on higher prices.
The three last remaining infrastructure stocks on the ASX: toll road groups Atlas Arteria (ASX: ALX) and Transurban (ASX: TCL), and gas pipeline operator APA Group (ASX: APA) are all top ASX100 stocks with a combined market value of a whopping $51.9 billion.
At face value, all three stocks look to be trading within what could be considered takeover territory. Transurban is trading flat over the last 12 months but is still down 20% from the $16.21 a share it was trading at back in February 2020.
Meanwhile, the share price of both Atlas Arteria and APA is down 34% and 42% respectively since July 2022.
These valuations explain why these stocks have been in the eyes of potential suitors for some time. Back in 2022 Atlas Arteria was alleged to have been in play after global investment group IFM Investors made a play for a 15% stake in the company.
Shareholder windfall
The valuation gap between listed and unlisted markets typically means that shareholders - who find good stocks they own and are sold out from under them – can usually expect to receive a parting bounty to compensate for their loss.
For example, IFM’s global head of infrastructure, Kyle Mangini has estimated the 15 takeovers his fund has made in the last 15 years have had an average 32% premium.
This figure is in line with the long-term Australian average of 34.7% that's paid to acquire control of a company.
