An ASX Media Release on 12 May 2016 set out a number of changes,
both immediate and proposed, to the admission requirements to the
official ASX list. The changes are intended to "maintain and
strengthen the reputation" of the ASX. However one of the side
effects is that the changes will make listings more difficult for
Recently there has been a perception that RTOs are an easier and
cheaper way for small businesses to list. Because of this, the RTO
pathway has been a preferred listing option for many small
Some of the ASX rule changes relate to how the ASX regulates
RTOs, otherwise known as backdoor listings.
The ASX no longer grants companies waivers of the 20 cent
minimum price rule which, in circumstances where their securities
are trading at less than two cents each, will prevent those
companies from using the backdoor listing process.
Previously, trading on the securities of an entity which
announced it was intending to enter into an RTO continued until the
transaction was approved by shareholders. Now, trading on the
securities of the entity will be suspended from the time the entity
announces it will enter into the RTO which takes away one of the
main advantages of RTOs. The ASX are also proposing to push out the
transaction timetable for backdoor listings by three weeks as it
will require a minimum of 15 business days to review the notice of
meeting relating to the transaction, and it is proposing to charge
a fee of $10,000 for this review.
The ASX has also indicated that it will scrutinise more closely
capital raisings undertaken in advance of shareholder approval for
the proposed transaction. This scrutiny will be on both the issue
of securities by an unlisted entity which become securities in the
listed entity once the transaction is completed, and on any capital
raising by a listed entity which occurs in the lead up to, or
after, the announcement of the proposed transaction. The additional
regulations for RTOs are likely to make RTOs less attractive. This
will drive those companies which were previously planning to list
through an RTO into the initial public offering (IPO)
INITIAL PUBLIC OFFERINGS
Unfortunately the proposed changes to ASX listing requirements
will put listing further out of reach for many small businesses.
These changes include:
Increasing the financial thresholds for listing –
lifting the "assets test" thresholds from net
tangible assets of $3 million or a market capitalisation of $10
million to an NTA of $5 million or a market cap of $20 million
increasing the consolidated profit requirement under the
"profit test" for the 12 months prior to admission to at
Introducing a 20% minimum free float requirement and changing
the spread test to better demonstrate a sufficient level of
investor interest in the entity and its securities to justify
Making the minimum $1.5 million working capital requirements
consistent across all entities admitted under the assets test
Introducing a requirement for entities admitted under the
assets test to provide audited accounts for the last three full
financial years, unless ASX agrees otherwise.
These proposed changes compliment modifications that the ASX has
already made to its listing rules to strengthen its absolute
discretion in deciding whether or not an entity may be admitted to
the official list.
If you are considering an exit event such as an IPO or an RTO,
it may be worth planning ahead to ensure your business is in a
position to comply with the new rules.
This newsletter includes links to recent documents relating to superannuation, funds management & financial services.
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