ASX uses ASIC inquiry to seek reforms encouraging more companies to list in Australia

The ASX wants new rules to incentivise business founders to list their companies in Australia, saying the current approach is driving companies to stay private or trade overseas.

The ASX wants incentives for business founders to list their companies on public markets. Picture: NewsWire / Nikki Short

The market operator has called for new rules incentivising founders to list their companies in Australia, arguing the current approach is driving businesses to stay private or trade on bourses overseas.

In its submission to corporate regulator ASIC’s review of private and public markets, the Australian Securities Exchange has called for a string of reforms it says are needed to boost the fortunes of local investors and stop the well of publicly traded investment opportunities from drying up.

Among its suggestions, the ASX has called for large private companies to face the same kind of public scrutiny listed operators face, beyond the current approach of filing limited accounts with the corporate regulator each year.

The Australian Securities & Investments Commission is probing the issue of public and private markets, amid concern public markets are fundamentally challenged, with more money chasing private opportunities.

ASX listings general manager James Posnett said listed markets were critical to the economy, offering access to growth capital and supporting wealth creation.

“Global competition for new listings has accelerated and while we believe ASX listings will recover from the recent slowdown in the global IPO market, it is an appropriate time to publicly debate how to improve the attractiveness of Australia’s listed markets,” he said.

“It is vital our listed markets remain globally competitive – and a missed opportunity for investors and our economy if Australian companies choose to list offshore.”

The ASX said rules must be relaxed to incentivise founders to list their companies in Australia, pointing to the likes of Atlassian listing in the United States as emblematic of the issue.

In addition, the ASX said disclosures from private companies should be improved, noting how large private companies had significant influence on the economy “while operating with relatively limited transparency”.

“Considering enhanced transparency and proportionate disclosure requirements for large unlisted entities may reveal opportunities to enhance market stability, support informed and confident retail and institutional investors, and economic resilience,” the ASX said.

The ASX pointed to the risk of financial shocks flowing from private companies, noting “an appropriate level of transparency would allow regulators and government to understand the risks presented in these markets”.

But the ASX also said “an appropriate balance would need to be struck between addressing the risks posed by large private entities and imposing increased regulatory burden”.

Some private companies will soon need to report their climate disclosures in the wake of new laws passed by the Albanese government.

The ASX also noted that current listing rules require a greater chunk of “free float” than is needed in the United States.

Australia requires companies to have 20 per cent of their shares available to trade, rising to 30 per cent for those in the S&P/ASX 200, compared to just 10 per cent in American markets.

The market operator also said changes are needed to allow founders to sell down their shareholdings in a more predictable way, cautioning current insider trading rules made this difficult.

Moreover, the ASX recommended the market allow a dual-class of shares, so founders can take their companies public without losing control.

The ASX also focused on the current prospectus process, warning Australia’s approach and the requirement to lodge documents with ASIC left too much risk at play.

The market operator said making forecasts optional may incentivise more companies to list.

“Reducing this ‘on risk’ period would shorten the amount of time that investors and companies are exposed to market risk, facilitate better price discovery and make companies more likely to IPO and investors commit to them,” the ASX said.

Originally published as ASX uses ASIC inquiry to seek reforms encouraging more companies to list in Australia