ASIC launches fast-track IPO trial - what you need to know
There has been significant regulatory and market focus on the operation of Australia’s public markets over recent months. Initial public offering (IPO) activity in Australia has seen a notable decline, reaching its lowest point in over a decade. ASIC’s recent review of the dynamics between public and private markets (together with the consultation submission) showed a strong trend towards the deployment of capital into Australia’s private markets.
Following feedback that structural or regulatory challenges – rather than market conditions alone – may be deterring the deployment of capital into public markets, ASIC has launched a two-year trial aimed at streamlining the IPO process.
Key takeaways
- Positive step: ASIC’s new fast-track trial is a welcome regulatory development. It represents a positive regulatory shift aimed at revitalising Australia’s public markets and addressing industry concerns about IPO inefficiencies.
- Regulatory alignment: The trial aligns ASIC’s review process with the ASX’s fast-track listing process. This means both reviews can happen at the same time, helping to reduce the time between prospectus preparation and official listing.
- Fewer delays: ASIC’s early engagement could reduce the need for supplementary or replacement disclosure documents being required to correct deficiencies otherwise identified post-lodgement. As ASIC could raise any concerns either prior to or early in the Exposure Period, this could lead to timing efficiencies, cost efficiencies and potentially reputational benefits for issuers/managers.
- Reduced market risk: By enabling earlier review and an accelerated listing process, the trial shortens the period between when new investors commit to an IPO and when securities begin trading, limiting the issuer’s and investors’ exposure to potential adverse market movements.
Australia's traditional IPO process
IPOs in Australia are typically priced through the bookbuild, before the disclosure document is provided to or reviewed by ASIC. Once lodged with ASIC, the disclosure document is subject to a mandatory exposure period – usually seven days but often extended to 14 (exposure period). During this time, issuers cannot accept applications for the securities offered under the disclosure document until the end of the exposure period.
The exposure period gives ASIC and the market an opportunity to review the disclosure document before any applications for the securities can be accepted.
If deficiencies are identified during the exposure period, a supplementary or replacement disclosure document may be required, potentially delaying the IPO.
What is changing under the trial?
Under the trial, eligible entities can submit a near-final draft of their prospectus or product disclosure statement (PDS) (in a pathfinder format) to ASIC at least 14 days before formal lodgement. The pathfnder – usually used for institutional marketing and pricing – can exclude certain deal metrics such as the offer price and number of shares to be issued.
If ASIC completes its informal review during this pre-lodgement window, it will ‘generally’ not need to extend the exposure period beyond the initial seven days. This could shorten the IPO timeline by up to a week, giving issuers more certainty and reducing the window for the raise to be impacted by market risk between committing to the offer and the commencement of trading.
ASIC’s no-action position
As part of the trial, ASIC has also adopted a ‘no action’ position that allows eligible entities to accept applications from retail investors during the exposure period – something normally prohibited. This change is also expected to ease timing pressures, particularly closing the retail raise components.
While the no-action position protects against enforcement for early acceptances, it doesn’t shield an issuer from consequences if the prospectus is subsequently found to be deficient (whether during or after the exposure period). In these circumstances, ASIC retains its power to issue a stop order on fundraising.
Who is eligible?
To qualify for the fast-track trial, entities must meet ASX’sfast-track listing criteria, including:
- a market capitalisation of greater than $100m upon listing; and
- no mandatory escrow being imposed.
Conclusion
ASIC’s new fast-track trial reflects a constructive regulatory shift, aimed at revitalising Australia’s public markets and addressing industry concerns about IPO inefficiencies. If it proves successful, it could lead to broader reforms to simplify the IPO process under Australian law.
Thinking about an IPO?
If you are considering an IPO, our team can help you assess your eligibility for the fast-track process and whether early engagement with ASIC could support your listing strategy.
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