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Should you buy into ASX government IPOs?

Sebastian Bowen
Initial Public Offering (IPO)

A strange thing happens from time to time – our government decides to join the fun on the ASX by offloading assets to the public markets.

Politics is a funny business, and so every now and again, the governing party decides that some state-owned company or another would do better by leaving the walled gardens of government.

While this might sound boring to a lot of investors out there, companies that used to be owned by the government are actually some of the best-performing ASX shares you can buy today.

Consider Commonwealth Bank of Australia (ASX: CBA). Whilst it might seem inconceivable today, CommBank used to be a government-owned business in its entirety. When CBA was eventually pushed out of the nest by Paul Keating back in 1991, you could pick up shares for just $5.40. Considering CBA shares will set you back over $80 today, it would have been a good move to get in early in hindsight (to say the least) – just check out the chart below.

It’s more than CommBank though. Our beloved Qantas Airways Ltd (ASX: QAN) went through the same process, as did CSL Limited (ASX: CSL) and perhaps most famously Telstra Corporation Ltd (ASX: TLS)

In fact, CSL wins the prize. Its IPO price was just $2.30 per share back in 1994 (again, thank you Mr Keating) – a far cry from the $273 price CSL shares command today.

Telstra is probably the biggest loser to date from the whole process. Some of Telstra’s shares were sold off for over $8 in the late 1990s – a share price that has never been breached since.

There are a string of other government IPOs that now litter the ASX –  both state and federal government initiated. Suncorp Group Ltd (ASX: SUN) was spun out of the Queensland government back in 1997.

Most recently, Medibank Private Ltd (ASX: MPL) left the confines of government back in 2015 – when Medibank hit the markets for $2 per share. Since MPL shares are currently at $3.16 (and were nearly $3.70 just a couple of months ago), I would also call this float a resounding success.

Foolish takeaway

What we can gather from all this is when the government decides to offload a business – it’s probably well worth checking out! Getting CSL or CBA shares on their initial offerings would have been a stunningly lucrative and successful move. So next time the government decides to sell off some of the family silverware – I’ll be watching like a hawk!

The post Should you buy into ASX government IPOs? appeared first on Motley Fool Australia.

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Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019