Faster IPOs are here

ASIC has introduced a two-year trial aimed at streamlining the initial public offering (IPO) process for companies listing on the ASX.

Eligible companies (those with a market capitalisation over $100 million and no ASX-imposed escrow) can seek a listing via the fast-track application process.

This will involve an informal review of a pathfinder prospectus two weeks before formal prospectus lodgement, potentially reducing the IPO timeline by up to a week. This means money in the bank sooner for the investment banks and IPO advisers, as lower overall costs for the IPO company receiving advice.

There is no change to director or executive remuneration disclosure requirements, which are legislated in the Corporations Act under s711. These can be undertaken cost effectively by strictly following established standards (e.g. AASB 124 and Corporations Regulation 2M.3.03), a bit more effort can go into design and disclosure to demonstrate how key management personnel (KMP) remuneration is aligned with company strategy and prospective shareholder interests, performance meets IPO forecasts, and KMP are retained beyond the ESCROW period. The extra effort should not lengthen time to bring an IPO to market, depending on advisers and the independent directors nominated.

The week’s saving comes from ASIC’s view that, if it has already conducted an informal review, it is less likely to need to request supplementary or replacement disclosure documents. Such requests can lead to it extending the exposure period (where IPO companies cannot process applications for securities) from 7 to 14 days.

The trial also includes a ‘no-action’ position, allowing eligible companies to accept retail investor applications during the exposure period.

These reforms were introduced in response to a decline in Australian public companies and IPOs, as highlighted in ASIC’s recent discussion paper (to read, click HERE). ASIC hopes these adjustments will boost IPO activity, which is at its lowest level in over a decade.

To read the full ASIC media release on the new fast-track IPO process, click HERE.