Canadian Brookfield Asset Management’s listing of its Australian coal port attracted tepid demand this week as environmental concerns and trade tensions with China weighed on investor appetite, sending the asset’s shares plummeting.
Shares in Brookfield’s Dalrymple Bay Infrastructure (DBI) slumped 16% in the Dec. 8 trading debut and recovered only slightly on Wednesday, rising 0.46%.
Brookfield increased the dividend yield on the offer to 7% from 5% to entice investors, concerned about risks related to environmental governance, into Australia’s second largest initial public offering (IPO) in 2020.
The stock market debut meanwhile was overshadowed by growing trade tensions between Australia and its largest trading partner China.
“The coal export risks out there were just a bit too high for us,” said Hugh Dive, chief investment officer at Atlas Funds Management.
Three other fund managers also told Reuters on Wednesday they had not invested in DBI, with some citing risks related to environmental, social and corporate governance (ESG).
A person involved in the listing said DBI attracted more interest from institutional investors overseas than in Australia.
Queensland government’s investment vehicle also stepped in to buy 9.9% of the company and about a third of the stock was sold to less sophisticated retail investors.
The Australian port is mainly used for exports of metallurgical, or steel-making coal, from the Bowen Basin in Queensland state, with China a key destination for exports going through the port. Thermal coal accounts for about 20% of its shipments, according to the port’s prospectus.
Australian media reported in November Chinese importers had been informally warned that a series of commodities from Australia would face increased inspections.
“Coal is one of the commodities that is being targeted by the Chinese so those escalating trade tensions with China really impacted the stock,” said Ric Ronge, head of investments at Adansonia Capital.
Tuesday’s share price fall represented a paper loss of A$100 million ($74.12 million) for Brookfield, according to Reuters calculations.
The global investment firm had been trying to sell the port for over a year before deciding to list it on Australia’s stock exchange. It still owns 49% of the coal terminal.
The listing also comes as appetite for coal-related assets has been decreasing in recent years, with bankers estimating that at least one-third of fund managers in Australia are more averse to such exposures than they were five years ago. Indeed, shares in Australian mining company Coronado have more than halved since its listing in 2018, in line with steep coal price falls.
Dalrymple’s IPO was second only this year to Macquarie Group’s listing of its partly-owned technology firm Nuix last week. Nuix shares rallied 60% in its Dec. 4 debut, a clear sign of investor preference for high-growth tech assets.
Source: Reuters (Reporting by Paulina Duran in Sydney; Editing by Ana Nicolaci da Costa)