Taking your business public on the Australian Securities Exchange (ASX) is a pivotal move that can significantly alter the course of your company's future. As one of the top five exchanges globally for raising capital, and with over 2,000 companies listed, the ASX offers a robust platform for growth.
The ASX provides access to a broad investor base, both domestically and internationally, with around 45% of investments coming from global markets, including Asia, Europe and North America. Listing on the ASX can enhance your company’s visibility, increase liquidity, and provide capital for expansion. Additionally, Australia’s mandatory superannuation scheme supports one of the world’s largest pools of investable funds, making the ASX an attractive option for companies looking to scale.
While these benefits are enticing, it’s essential to weigh them against the increased regulatory scrutiny, reporting obligations, and market volatility that come with being a public company. Public listings expose companies to the scrutiny of shareholders and the media, but with proper preparation, these challenges can be managed effectively.
This article will outline key considerations for business owners and executives looking to list on the ASX, with a focus on the strategic steps needed to ensure success.
Meeting the ASX requirements: Entry pass
Listing your business on the ASX involves meeting a range of criteria, including:
- Profit or Asset Test: A company must either meet the profit test of at least AUD1million in aggregated profit from continuing operations over the past three years + AUD500,000 consolidated profit over the last 12 months, or the asset test, which requires at least AUD4 million in net tangible assets or a market capitalisation of AUD15 million.
- Shareholder Base: Companies must have a minimum of 300 non-affiliated shareholders holding at least AUD2,000 worth of shares each.
- Corporate Governance: Strong corporate governance is non-negotiable, and companies are expected to demonstrate transparency, accountability, and leadership in line with ASX regulations.
Gaining a proper insight about these requirements helps you in assessing where the gaps may exist pre Initial Public Offering (IPO).
The listing process: Step-by-step
Preparing for an IPO requires meticulous planning. We've included below an outline of the typical steps involved:
Appointing advisers: One of the first tasks is to appoint an experienced team of advisers to guide you through the IPO process. This usually includes investment banks, corporate advisers, accountants, and legal experts. These professionals will assist in everything from drafting the prospectus to conducting due diligence and pricing the offering.
Preparing the prospectus and conducting due diligence: The prospectus is a crucial document that provides potential investors with all the necessary information about your company. This includes financial performance, risks, and opportunities. The due diligence process runs concurrently with the prospectus preparation to ensure all claims are legally sound and defensible.
Institutional marketing: The Corporations Act strictly limits advertising your IPO before you lodge your prospectus with ASIC.
However, certain marketing activities can be undertaken to institutional investors, including IPO roadshows. These are a series of meetings between your company, investment bankers and institutional investors which are used to generate interest in the offer.
Lodge prospectus with ASIC: An ‘exposure period’ of seven days starts from the date of lodgement. During this time the prospectus is made available for public review and comment, and during this period the company cannot accept any applications under the offer. ASIC can extend the exposure period to up to 14 days after lodgement.
Lodging applications, ASX approval and commencing trading: The final steps include lodging the formal listing application with the ASX, which takes approximately six weeks to review and approve. Once approved, shares can be offered to retail investors, and trading can commence.
It is important to note the process can take between 12 to 24 months.
Challenges and costs to consider
Preparing for an IPO is not just about meeting ASX criteria but also about ensuring your business is ready for life as a public company.
While an ASX listing provides numerous opportunities, it’s important to be mindful of the costs involved. These range from the fees for auditors, legal advisers, and listing charges, which can quickly add up to hundreds of thousands of dollars. Moreover, ongoing reporting obligations, such as half-yearly financial statements, must be adhered to, adding an additional layer of operational complexity.
There are also strategic questions that need to be answered:
- Is your board equipped to manage the increased demands of a public company?
- Does your business have the governance framework in place to handle the transparency required of a listed entity?
These are all considerations that must be addressed before proceeding with an IPO.
Why partner with Moore Australia?
Successfully navigating the complexities of an ASX listing requires expert guidance and careful planning. At Moore Australia, we work closely with business leaders to assess IPO readiness, identify potential challenges, and guide companies through each stage of the process, from preparing the prospectus to securing a fair valuation.
Our experienced team is dedicated to ensuring your business not only meets the ASX’s requirements but is also strategically positioned to capitalise on the opportunities that a public listing can offer. With our global network and deep expertise in capital markets, we can connect you to the resources and insights you need to thrive.