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Note from the editor - 21 October

Glenn Freeman  |  21 Oct 2019Text size  Decrease  Increase  |  
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Last week's failed $3 billion IPO attempt by credit provider and self-styled buy-now-pay-later company Latitude was a surprise to many market participants, as the float sank on poor investor quality. 

 

But the only shock for Morningstar analyst Nathan Zaia was that the IPO took so long to be canned, partly because the offer price had already been cut to $1.78 from $2.00 a share. He told Lex Hall on Wednesday that the shopping list of risks attached to the Latitude business model "ended up being too much for investors to swallow."

Reasons for the failure of what would have been the largest Australian IPO of 2019 have been thoroughly parsed by the market, who lay some of the blame with last year's banking royal commission and declining trust in business models built around peddling credit.

The fallout from the Hayne inquiry continues to permeate the local financial sector, as discussed by a number of presenters at last Thursday's annual Morningstar Individual Investor Conference. AMP chief executive Francesco De Ferrari, who took the helm of the embattled firm a few months after his predecessor resigned under a cloud, on Thursday spoke about the future of financial advice.

Just a couple of hours later, Adele Ferguson – the investigative journalist who arguably laid the royal commission groundwork – discussed her new book Banking Bad on stage with Lex Hall.

Peter Warnes regularly writes about Australia's record high levels of personal debt and persistently low household spending, and was last week at his ebullient best. Alongside suggestions Australia could be headed for deep economic malaise not seen since the 1930s and that the US-China trade war may not end for five years or more, he criticised Australia's fiscal policy he believes is pushing conservative yield-reliant investors into riskier assets.

But the Reserve Bank is sticking to its line that high household debt isn't cause for undue concern, as discussed in this article by Nicki Bourlioufas.

On a more positive note, Lex Hall explored some of Morningstar's preferred ways for investors to buy into the electric vehicle revolution.

We also looked at some of the reasons behind the global success of Australian biotechnology firm CSL Limited, as it last week marked 25 years since listing on the ASX.

Since it floated in May 1994 at 83 cents, CSL's share price has increased at a compound annual growth rate of 25 per cent, now surpassing the $250 milestone Morningstar predicted in mid-2018.

Last week was a big one for Morningstar, too. In addition to wrapping up another successful Individual Investor Conference, we've added popular industry newsletter Cuffelinks (now known as Firstlinks) to the Morningstar stable. Having formalised the acquisition on 11 October, we look forward to welcoming Graham Hand, Leisa Bell and their network of expert contributors to Morningstar Australasia.

Warm regards,
Glenn Freeman

is senior editor for Morningstar Australia

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