ASX tightens listing requirements

The market operator is upping profit requirements for would-be listings, among a bevvy of stricter criteria.

The operator of the local bourse has finalised plans to tighten standards for admission to the ASX official list.

In a statement outlining the changes, ASX Ltd said the new rules would help maintain investor confidence in the IPO market.

Among the changes is a stronger profit test that will see companies required to show consolidated profits of $500,000 for the 12 months prior to admission, up from $400,000 previously.

IPO candidates have the option of passing either the profit test or a separate asset test, with the criteria for the latter assessment also tightening.

In the past companies eyeing the asset test would be required to show net tangible assets of $3 million or a market capitalisation of $10m.

These two figures have been revised upwards to $4m and $15m, respectively, although the bourse operator opted against a proposal for even stronger requirements of $5m and $20m.

Any company proceeding with the asset test will also now be required to reveal two full financial years of audited accounts prior to applying for admission to ASX boards.

Other changes made to listing conditions include a new 20 per cent minimum free float requirement, a single-tier spread test of at least 300 investors each holding at least $2,000 of securities and a standardising of the $1.5m working capital requirement for those admitted under the assets test.

“ASX undertook an extensive consultation and review of the potential impact of the new rules on the market,” Amanda Harkness, ASX Group Executive, said.

“This process improved the final package of ASX rules and guidance released today, ensuring a smoother transition to the higher thresholds for companies and continued access to IPOs for retail investors.

“The updated standards will strengthen our market’s reputation within the region and around the world.”

Backdoor listings – which allow companies that may not have otherwise cleared listing requirements to join the market by purchasing already-listed companies – are also facing a clampdown.

Regulations will now force any companies pursuing backdoor listings to comply with additional disclosure requirements, with the failure to do so seeing shares suspended.

“This new policy addresses market integrity concerns about ensuring an informed market for investors, while providing a clear set of guidelines for the disclosure needed to enable trading to resume once a backdoor listing is announced,” ASX chief compliance officer Kevin Lewis said.

The new rules come into force from December 19 this year.