Good morning,

The ASX is getting lighter with two companies quitting the bourse last week.

On Wednesday, billionaire businessman Raphael Geminder moved to delist his struggling Pact Group in a deal that would value one of Australia’s largest packaging companies at just $234 million. A day later, Yellow Brick Road, the mortgage-broking business founded by serial entrepreneur and former host of Celebrity Apprentice Australia Mark Bouris, also signalled its intention to delist.

In the grand scheme of things, two companies out of 2000-odd isn’t a big deal, but it’s noteworthy, especially with the current drought in new floats.

So, why are companies deserting public markets? While every company has its own reason, there are a couple of big themes at play here.

First, the rise in corporate governance and overhead costs is nothing to sneeze at. Second, it’s difficult for small companies like YBR to get any real analyst coverage. Third, the concentration on the buy-side in mega superannuation funds means large players can only invest where there’s a scale. A $20 million company is never going to cross their radar.

The reasons for small companies to list are still there – to gain liquidity for existing shareholders and/or to raise capital for strategic initiatives – but today there are plenty of other avenues for a company with a $100 enterprise value to raise money, whether that be private equity funds or venture capital.

As one founder put it to us: “When I was in Silicon Valley in the 90s, you would never go past a Series C or D funding round – you’d be considered a failure because you hadn’t publicly listed yet. There’s not that stereotype anymore.”

Who’s next?

Happy reading,

• New York private equity firm Paine Schwartz Partners is expected to announce a revised takeover bid for Costa Group.
• US investment giant Ares is set to take on rivals EQT and Affinityin the $1 billion-plus VetPartners auction.
• Perpetual is busy handing out redundancies to support staff in a cost-cutting move.
• Listed uranium junior Alligator Energy held investor meetings last week in what fund managers reckon was a warm-up session for an impending cash call.
• New York private equity firm Aria Growth Partners has been in talks to buy a minority stake in Ultra Violette.

• Instacart $1 billion initial public offering speeds up after Arm success, Bloomberg reports

Sunscreen brand Ultra Violette has 137,000 followers on Instagram. Its products sell for about $50 for 75 millilitres and are sold via higher-end beauty retailers like Adore Beauty and even Net-a-Porter and Harrods.

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