JPMorgan, Barrenjoey, Goldman Sachs among banks pressuring ASX, ASIC about listing process
A group of investment banks have joined forces to press the ASX and corporate regulator for wholesale and radical changes to the sharemarket listing process.
A group of investment banks have joined forces to press the ASX and corporate regulator for wholesale and radical changes to the sharemarket listing process, as they consider ways to jump-start a moribund market for initial public offerings.
The Australian understands JPMorgan corralled a group of eight investment banks – including Barrenjoey and Goldman Sachs – to make a formal and confidential submission urging sweeping changes to streamline the domestic IPO process.
Sources said JPMorgan tapped law firm King & Wood Mallesons to help draft the submission that was lodged with the ASX and the Australian Securities and Investments Commission in September.
A round of engagement had already occurred between the groups following initial feedback on the proposal, which included some practical changes and some “reasonably radical” ones, a person with knowledge of the submission said. A JPMorgan spokesman declined to comment on the document when contacted on Wednesday.
The detailed submission is understood to propose a string of changes that would shorten the process to list on the ASX and bring it closer to the timetables used in the US.
The document notes that having 2.5 to 3.5 weeks from pricing an IPO to official quotation on the ASX, through a front-end float deal structure, is “out of step” with global markets.
It suggested changes to potential exposure periods for IPOs and delved further into pre-vetting processes for prospectuses, with the banks pushing for a model that would involve engagement with ASIC but with fewer prospectuses being formally vetted.
The submission from the investment banks comes amid another weak year for listings on the ASX, and concerns that an uptick in mergers and acquisitions will lead to a hollowing out of the bourse, if IPO markets don’t improve. It’s understood ASX received the submission on IPO processes and was broadly supportive of it. An ASX spokeswoman on Wednesday declined to comment directly, but said: “ASX has been involved in many discussions with our customers about possible changes or reforms that could streamline and further support a vibrant IPO market and enhance ASX as an attractive listing venue.”
When asked about the submission, an ASIC spokesman referred to comments made by chairman Joe Longo in July about wanting to maintain Australia’s reputation as a competitive place to raise capital.
“We’re very interested in ideas about how to … improve and make the process more efficient,” he said at the time.
“I’m looking for actionable ideas … if there are particular issues or concerns about the regulatory settings, then ASIC’s very interested in hearing about those, and figuring out what is it about the current settings that are causing an unnecessary friction.”
Sources said ASIC had flagged it was assessing changes to IPO processes that would fall within its current remit, rather than requiring legislation to be changed.
Early next year, it’s understood the regulator intends to release a consultation paper to further guide debate on the IPO market and potential reform.
Investors may be concerned, however, with some of the proposals being touted by bankers given some are still nursing the scars of investing in disastrous floats such as that of department store Myer.
Debate about how Australia’s sharemarket and exchange will navigate the years ahead comes amid strong growth in private markets, including direct lending and private credit, meaning companies have more funding options if they remain unlisted.
Regulators are watching developments closely, however, and Mr Longo this year indicated ASIC has a heightened interest in the ballooning growth in private credit. The Reserve Bank has estimated there is some $40bn in private credit outstanding in Australia, noting that while risks to financial stability were contained, private credit markets remained “opaque” and were expected to grow rapidly.
Various local industry participants have expressed concerns in 2024 about cumbersome IPO processes and the need for them to evolve. In August, Ashurst’s mergers boss Neil Pathak called for a rethink of how ASX listings were prepared and executed. “The listing process needs to be shortened,” he said, noting ASIC could also undertake more pre-vetting of prospectuses.
Barrenjoey’s co-executive chairman Guy Fowler in July urged a simpler ASX listing process, which would follow earlier changes to how secondary raisings were conducted. Mr Fowler said ASIC could offer companies a “honeymoon period” as they became publicly traded, particularly around prospectus forecasts, before entities had to comply with all their obligations.
The domestic pipeline for IPOs is seeing green shoots this month, and investors are awaiting HMC Capital’s float of a $4.2bn data centre trust in December.
But recent floats have had a patchy performance. The listing of payments firm Cuscal on Monday saw the stock decline from its $2.50 debut price. Cuscal closed at $2.37 on Wednesday.
Construction and hire company Symal’s IPO earlier this month was also muted.
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