Will the ASX Listing Rule changes affect you?
Following a meeting of the Australian Stock Exchange (ASX) on 13 April 2016, numerous changes have been proposed in relation to the listing requirements for participating companies. The changes are intended to apply from 1 July 2016. These changes, should they be implemented in their current form, will have a significant impact on those companies wishing to list on the ASX, whether through a traditional initial public offering (IPO) or the increasingly popular reverse takeover, commonly referred to as a backdoor listing.
Set out in the table below are some of the main changes to be aware of come 1 July 2016:
|ASX Listing Requirements
||Post 1 July 2016
|Asset Test (ASX Listing Rule 1.3)
||Minimum requirement under either the Net Tangible Asset (NTA) test or Market Capitalisation test.
||NTA: $3 million
Market Capitalisation: $10 million
|NTA: $5 million
Market Capitalisation: $20 million
|Investment Amount (ASX Listing Rule 1.1)
||Minimum investment for spread shareholders.
|Free Float (ASX Listing Rule 1.1)
||Minimum free float (ie non-escrowed shares) on issue.
||Applicants with small free float (<10%) are expected to outline plans, in their Prospectus or Information Memorandum, to increase free float to at least 10%.
||10% at an absolute minimum will be required at the date of listing.
|Profit Test (ASX Listing Rule 1.2)
||Minimum profit in most recent financial year.
|Working Capital Requirements (ASX Listing Rule 1.3)
||Minimum working capital requirements after allowing for the first full financial years budgeted administration costs.
||$1,500,000 (mining entities only)
||$1,500,000 (all entities)
The amendments identified above translate to increased scrutiny on companies as they pursue a public offering on the ASX. In addition to the above, ASX discretion to reject companies seeking to list is being reinforced. This entails, among other things, enhanced examination into the credibility of board and management, the existence of a sound business model and the origin of the issuer, with a particular focus on those from emerging markets.
In relation to backdoor listing transactions the ASX will now require an audit of all accounts, including those of the target business. Furthermore the suspension of trading for companies undertaking backdoor listing transactions from the date of announcement of the transaction, as opposed to the date of the shareholder meeting, is under consideration.
It is unclear the impact these changes will have on existing transactions although it appears the ASX will announce transition arrangements. It also seems the ASX will be accepting submissions with regards to these proposed changes. Whether or not all of the proposals are adopted, it is clear the ASX is enhancing the listing requirements to increase investor confidence in parties seeking an IPO or backdoor listing.
In the event these changes are likely to affect your business, early consultation with the ASX is encouraged to ensure all the relevant listing requirements and/or transition arrangements are met.
Should you require any further information on how these changes may affect your business we welcome you to get in touch with our Corporate Finance team in Sydney on (02) 8346 6000 or Newcastle on (02) 4962 2688. Alternatively, click the button below to find an expert nearest to your location.