The Australian Securities Commission has proposed slamming the door shut on ASX listings by start-up companies that have little in the way of turnover or profits. A major target appears to be a number of dubious technology start-ups – some of them based offshore – with little in the way of either.
The ASX has launched a discussion paper which outlines its thinking on this matter. Among other things it calls for higher financial thresholds for companies seeking to list, including those that have used so-called backdoor listings, allowing themselves to be acquired by dormant but ASX-listed mining companies, of which there is no apparent shortage.
More than 100 technology-based companies have listed on the ASX over the past two years, many with revenues of less than $1 million a year, and as previously noted in CDN, two – Koolsee and Shark Mitigation – with no revenue at all (CDN, May 10).
The situation has also led to concerns that in some cases the ASX is being used by a number of overseas companies seeking a stock exchange listing with lower standards than the US-based Nasdaq.
The tightening of requirements for backdoor listings certainly appears well overdue. More than 70 companies – some of which would not pass the test for a basic listing – opted to use this method between July last year and the end of April 2016.
Under the proposed changes, trading in shares of a company that announces a backdoor listing will be suspended until the entity complies with the latest admission requirements.
Says ASX compliance officer Kevin Lewis: “The ASX is overwhelmingly open for business for small-cap explorers and emerging growth and innovation companies, But you can be too small to list – this is a nuance which maybe has got a bit lost in the weeds.”
