Not sure if you qualify for an Australian Securities Exchange (ASX) listing?

1. About the ASX

   • The ASX is the main equity market in Australia offering listings, trading, technical and information services and other financial services.
   • Corporations, individuals and other entities around the world engage with the ASX to manage risk and raise capital to grow and expand their business functions, and at some stage in their development, many growing and successful companies consider listing on the ASX via an Initial Public Offering (IPO).
   • Listing on the ASX offers a range of opportunities and challenges for companies, that can be navigated through tailored and structured advice having regard to the circumstances of a company.
   • The opportunities include raising capital for multiple uses such as debt financing or in support of future acquisitions, creating liquidity by trading in the company’s shares, or by simply raising the profile of the company.
   • The challenges include the loss of some control over the company, increased disclosure and corporate governance, and a significant investment in time.

2. What do you need to qualify for an ASX IPO?

Companies must be in an advanced stage of development to list on the ASX having regard to the capital structure, board experience and operations of the business.  An IPO is a complex transaction, and due consideration should be given to whether or not an IPO is the right fit for your company.

To list on the ASX, the minimum admission criteria (including as to structure, size and number of shareholders) can be summarised as follows:

General Requirements

• A minimum of 300 non-affiliated investors holding a value of minimum AU$2,000 each;
• A free float of 20% – which refers to the shares of a company that can be publicly traded and are not restricted (i.e. held by others)

Board

• The board should include directors with financial experience in listing and managing companies.

Company Size

• You will need to satisfy an “Asset” or “Profit” test:
  • The Asset test is AU$4 million net tangible assets or AU$15 million of working capital; The prospectus or information memorandum for the offer must also include a statement that your company has sufficient working capital; and
  • If you are seeking admission under the Profit test, there is no working capital requirement. The Profit test is AU$1 million aggregated profit from continuing operations over the past 3 years + AU$500,000 consolidated profit from continuing operations over the last 12 months.

Ongoing Reporting

• Financial Reporting is required on a half-yearly and annual basis in Australia. Quarterly reporting of cash flows is also required.

3. Statistics

In order to understand whether a company is best suited to list on the ASX, it is critical to understand the current ASX environment, including trends and statistics in the industry:

• Some trends and statistics for listings (all which have been sourced from ASX IPO Review 2020)[1]:
  • Despite the COVID-19 pandemic, 2020 was the best year for the global IPO market since 2007. Global IPOs increased by 62% by capital raised – (US$333 billion), and up 21 per cent by listings (1,615) (Source: Dealogic).
  • The ASX experienced a similar pattern. The number of new listings increased 23%. IPO capital raised was down 23%, but the market value of new listings was up 148%.
  • The top three companies listing by number were materials (31), technology (19) and healthcare (13).
  • The Top 3 IPOs in 2020 by capital raised were:
    • DBI – Dalrtmple Bay Infrastructure Ltd (Transportation Infrastructure) with $1,286m raised;
    • NXL – Nuix Ltd (Software) with $953m raised; and
    • LFG – Liberty Financial Group (Diversified Financial Services) with $321m raised.
  • Some trends and statistics in respect of investors:
    • The ASX has seen a considerable shift in sentiment and behaviour in investors caused by the COVID-19 pandemic. For some investors, the impact has been considerable and many investors have responded by focusing on diversification and risk management.
    • A survey conducted by the ASX Australian Investor Study 2020, which you can access here, suggests that 54% of investors have made changes to their portfolios, with younger investors most likely to have made greater shifts and older investors more inclined to stick with their existing strategy, with 28% of individuals having changed their retirement plans.
    • Despite the pandemic, 64% of investors surveyed in May 2020 said they would accept moderate or high variability with the potential for higher returns, an increase of 18% from the January 2020 survey.
    • Among younger investors, the most common goal in investment is to build an income stream. In contrast, retirees place a higher priority on asset and income protection (21%), although 27% are still focused on capital growth.
    • Australian shares are the most widely held asset class, owned by 58% of investors.
    • The survey shows that Australians generally have a high level of trust in both ASIC and ASX, rating them ahead of accountants, super funds and the major banks.

The future of Australian investing looks promising. The last few years have seen an influx of new investors, the accessibility and affordability of listed securities is very appealing, being the most popular investment across the board.

4. Seeking financial and professional advice

   • A company should obtain guidance as to the eligibility requirements and process of a listing on the ASX.
   • The IPO process includes structuring meetings, initial due diligence and prospectus drafting, communications with the ASX, preparing a listing application and all relevant disclosure requirements, negotiating agreements, attending to pre-marketing of the IPO and lodgement of the prospectus with ASIC.
   • The process can often be difficult to navigate and complex to understand. Advice as to the company’s listing is critical before a company incurs significant time and costs in commencing the IPO process.
   • The process can be daunting, but it’s important to remember that there is expert help available to steer you through the process – from assessing whether your company is eligible to list on the ASX to structuring IPO funding and other obligations under Australian Law.

This guide is intended to be an overview, not a comprehensive summary or advice.

[1] https://www2.asx.com.au/blog/investor-update/2021/asx-ipo-review