Thinking | 9 June 2021
ASX cracks down on ‘ramping announcements’
The use of ‘ramping announcements’ has been on ASX’s radar for some time now. Listed companies should carefully consider the content of and language used in market announcements, following ASX’s latest update to Guidance Note 8, which came into effect on 5 June 2021.
As the name suggests, a ‘ramping announcement’ is made with a view to ‘ramping up’ the price of securities and can take a variety of forms. Examples include announcements that contain no new material information or substance but are issued under the guise of ‘business updates’ or on the back of strong market sentiment in a sector. A quick series of announcements intended to pique investor interest but which aren’t particularly material can also be ‘ramping announcements’.
‘Ramping announcements’ can also take the form of an announcement that an entity has entered into what appears to be a material contract but with very limited information disclosed to actually assess the materiality of the contract and its impact on the price or value of the entity’s securities. This has been a particular area of focus for ASX.
Examples of ‘ramping announcements’ identified by ASX include:
- announcing a contract with a major customer to leverage off the customer’s reputation, without properly quantifying the benefit to the entity. In one instance, this included disclosure of a ‘material commercial agreement with a leading financial entity’ under which the entity was to receive less than $1,000;
- announcing a contract when in fact it is only a non-binding heads of agreement or a framework agreement that only establishes contractual arrangements that will apply to future orders (if any are made);
- projecting substantial revenues, without reasonable grounds; and
- describing a contract as ‘material’ when clearly it is not.
ASX has previously observed instances of ‘ramping announcements’ being made just prior to or after a capital raising, presumably with the intent of boosting the raising price or the post raise trading price or following the appointment of advisors where they are remunerated in securities.
If ASX suspects a ‘ramping announcement’ has been made, it will carefully consider whether to suspend trading and issue a query letter to the entity seeking further information about the announcement. In particular, ASX may ask the entity to advise what information was market sensitive, and, if not market sensitive, to explain the purpose of the announcement, and, if the announcement includes any projections or forward looking statements, the reasonable grounds on which those statements are based. This also aligns with ASX’s recent monitoring activities in relation to the disclosure of material contracts, which have involved revisiting historical announcements to assess whether matters previously disclosed are consistent with, and do not overstate, the true position reached by the listed company in relation to the relevant contract or transaction.
Where an announcement relates to a contract, ASX may ask for a copy of the contract (not for release to market) in order to verify compliance with disclosure obligations.
ASX may also require corrective disclosure to be made where information in a ‘ramping announcement’ was not material or was incomplete or misleading, advising of these matters and stating that investors should not make investment decisions based on the announcement. This is unlikely to be well received by the market.
With the continued focus by ASX on ‘ramping announcements’, listed companies should ensure they turn their minds to the appropriateness of announcements that do not clearly contain price sensitive information. While there will often be a range of legitimate reasons for making such announcements, careful consideration should be given to the language used, the timing and proximity to other announcements and the substance of the announcement.
For further information regarding disclosure obligations, please contact our team.
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