- With effect from 1 August, 2012, an entity with a market capitalisation of $300 million or less, and not included in the S&P/ASX 300 Index, will be eligible to seek shareholder approval at its next AGM to obtain an additional 10% "placement capacity".
- With effect from 1 November, 2012, a third alternative will be added to the requirement for "sufficient shareholder spread" in the admission conditions to the ASX, which will enable any company with half of all of its issued ordinary shares held by unrelated parties and at least 300 shareholders, each holding marketable parcels of shares worth $2,000 or more, to be eligible for admission to the Official List (subject to satisfying all other conditions to admission).
- Companies applying to be admitted to the ASX after 1 November, 2012, in reliance on the "assets" test (as opposed to the "profits" test) will need to have $3 million – instead of $2 million – in net tangible assets, excluding the costs of its IPO, to be eligible for admission to the Official List.
Additional placement capacity for small and mid cap companies
From August 1, 2012, the ASX Listing Rules will feature a new Listing Rule 7.1A, under which an entity with a market capitalisation of $300 million or less, and not included in the S&P/ASX 300 Index (Eligible Entity) may seek shareholder approval at its AGM to issue equity securities equivalent to up to 10% of the number of ordinary securities on issue, by way of placement, at any time within 12 months from the date of the AGM (Additional Placement Capacity). This additional capacity is in addition to any issues made:
- within the 15% cap currently permitted without shareholder approval, or above the 15% cap but which have been approved by shareholders under Listing Rule 7.1; or
- under an exception in Listing Rule 7.2.
Entities intending to seek Additional Placement Capacity under Listing Rule 7.1A should note:
- special resolution – the resolution for Additional Placement Capacity must be approved by ordinary security holders of the entity holding, collectively, at least 75% of the total number of votes able to be cast on that resolution,
- eligibility assessed at time of AGM – entities are eligible for Additional Placement Capacity only if, at the time of the AGM, its market capitalisation is less than $300 million and it is not a S&P/ASX 300 entity. Two important implications arise from this:
- entities that are "eligible" to seek Additional Placement Capacity at the time of dispatch of its Notice of AGM, but expect to be included in the S&P/ASX 300 Index or expect their market capitalisation to exceed $300 million by the time of the AGM, will not be entitled to seek Additional Placement Capacity under Listing Rule 7.1A and will be required to disclose this concern in the relevant Notice of AGM; and
- entities that receive shareholder approval for Additional Placement Capacity at their AGM, but whose market capitalisation exceeds $300 million, or who is included in the S&P/ASX 300 Index, after that AGM is concluded, will nevertheless have the benefit of the Additional Placement Capacity for the immediately following 12 month period.
- limitation on discount – securities issued under Listing Rule 7.1A must not be issued at a price that is less than 75% of the volume weighted average price (VWAP) of those securities, calculated over the 15 ASX trading days immediately before:
- if the securities are issued within 5 trading days after the date on which the issue price is agreed, the date on which the issue price of those securities is agreed; or
- in any other case, the date of issue of those securities.
The relevant VWAP may be sourced from ASX Customer Service helpline (telephone: 131 279) or any reputable information service provider.
- additional disclosure – an entity seeking Additional Placement Capacity must disclose, in Notice of AGM, the additional information prescribed under Listing Rule 7.3A. The Notice of AGM should include, amongst other things:
- the purpose for which securities may be issued in reliance on the Additional Placement Capacity, the entity's allocation policy for such issues and the minimum price at which those securities will be issued;
- a statement as to the risk of dilution of the respective relevant interests and voting powers of the entity's existing ordinary security holders in the entity, as a result of such an issue, including specifically that there is a risk that:
- the market price for the securities may be significantly lower on the issue date than on the date of the AGM; and
- the securities may be issued at a discount to the market price for those securities on the issue date; and
- a table setting out the comparative, potential dilutionary effect on the entity's existing shareholders of an issue of securities issued in reliance on the Additional Placement Capacity, depending on:
- what price those securities are issued at; and
- the aggregate number of ordinary shares on issue in the capital of the entity at the relevant time;
including where the price of the securities has fallen by at least 50%, and the aggregate number of issued shares in the entity has doubled, since the date of the AGM at which the Additional Placement Capacity was approved.
- post-approval disclosure – an Eligible Entity who has received shareholder approval for Additional Placement Capacity, must disclose the additional information prescribed in Listing Rule 3.10.5A, each time it issues securities under that approval, including the reasons why the entity issued the securities in reliance on its Additional Placement Capacity, as opposed to a pro-rata or other type of issue.
This additional information should be disclosed to ASX at the time of lodgment of the Appendix 3B application for quotation, which has been amended to specifically contemplate issues made pursuant to an entity's Additional Placement Capacity.
ASX Admissions amendments
Security holder spread test
From 1 November, 2012, an entity seeking to be listed on the ASX will only need to meet one of the following three tests in order to satisfy the ASX that it has a sufficient spread of securityholders – and therefore, there is sufficient liquidity in its securities – to become a publicly listed entity:
- 400 holders, each holding parcels of securities in the main class worth at least $2,000 (excluding restricted securities). There is no minimum percentage of the issued capital that non-related parties are required to hold;
- 350 holders, each holding parcels of securities in the main class worth at least $2,000 (excluding restricted securities), with at least 25% of all the securities in the main class (excluding restricted securities) being held by non-related parties (see Condition 7 of Listing Rule 1.1); or
- 300 holders, each holding parcels of securities in the main class worth at least $2,000 (excluding restricted securities), with at least 50% of all the securities in the main class (excluding restricted securities) being held by non-related parties (see Condition 7 of Listing Rule 1.1).
An entity seeking to be admitted to the ASX based on the size of its assets – as opposed to its profits – will now be required to have net tangible assets of at least $3 million after deducting the costs of fund raising, before it is eligible to apply for admission.
Listing Rule 1.3.1 has been amended to increase the threshold test from $2 million to $3 million for all applicant entities, other than those that satisfy the profit test in Listing Rule 1.2.
The above amendments to the "spread" and "assets" requirements to admission to the Official List of the ASX will apply to all entities applying for admission to the Official List after 1 November, 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.