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Doing an IPO in Australia

This guide provides a thorough overview of Initial Public Offerings (IPOs) in Australia, explaining the process of converting a privately-owned company into a publicly-traded entity. It discusses IPO trends from 2012 to 2013, listing requirements set by the ASX, the advantages and disadvantages of going public, and the essential information that must be included in a prospectus. The document also highlights the recent focus on clear and effective disclosure by the ASIC and compares the ASX with the APX, assessing their roles in the Australian market landscape.

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Doing an IPO in Australia

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  1. Doing an IPO in Australia MICHAEL HANSEL, PARTNER

  2. What is an IPO? • The terms IPO, public offering, listing or floating are, by and large, interchangeable • These terms describe the process of transforming a privately owned company into a publicly-owned company whose shares or other securities can be traded on a recognised securities exchange

  3. IPOs in 2012 – 2013 (up to 30 June) • The number • 140 for the financial year ending 30 June 2013 [99 in 2012 and 41 in 2013] • The ‘winners’ and the ‘losers’ • Comments on last year • Just 33 were above $US 20 million • Comments and expectation on 2013/2014 • Optimistic • Pent-up interest • Potential transactions are in the pipeline

  4. IPOs in 2012 – 2013 (up to 30 June) (cont) • Second quarter of 2013 market review • mixed results • three withdrawing applications, nine new floats, 40 percent drop from the same quarter last year • Some substantive deals - proceeds totalled $2,608 million, the second best quarter in the past five years

  5. Improved IPO Landscape

  6. Star floats – 2012^ (gain percent)

  7. Biggest raising (amount raised $ m)

  8. The pros and cons of listing • Benefits • Access to a greater pool of capital • Improved financial condition • A (secondary) market for your organisation’s shares • Increased shareholder value • Improved valuation • Succession Planning • A path to mergers and acquisitions • Higher corporate profile • Alignment of employee interest/management interests • Institutional investment • Reassurance of customers and suppliers

  9. The pros and cons of listing (cont) • Disadvantages • Loss of control • Dealing with shareholders' expectations • Restrictions on selling shares • Enhanced Disclosure • Limits on management's freedom to act • Initial and ongoing expenses • Continuous disclosure

  10. Listing Requirements (ASX) • Min market capitalisation 1 Net Tangible Assets: Calculated as the total assets of a company, minus any intangible assets such as goodwill, patents, and trademarks, minus all liabilities and the par value of preferred stock. Also called net asset value and book value. 2 Market Capitalisation is the value of the company expressed as the told number of shares on issue multiplied by the issue price.

  11. Listing Requirements (ASX) (cont) • Min number of shareholding 1Number of shareholders required to hold a parcel of shares with a value of at least $2,000 2Free float (% of securities held by non – related parties of the company)

  12. Listing Requirements(ASX)(cont • Working capital requirements following listing • At least $1.5 million • Or if it is not, it would be at least $1.5 million if the entity’s budgeted revenue for the first full financial year that ends after listing was included in the working capital

  13. Listing Requirements(ASX)(cont) • Relevant escrow considerations • The ASX may restrict the transfer of shares known as “escrow” issued before the listing so that they cannot be sold for a period of up to two years after listing

  14. Listing Requirements (ASX)(cont) • What is a Prospectus? • A document issued by a company setting out the terms of its equity issue • Must be lodged with both the Australian Securities and Investments Commission (ASIC) and ASX • What information is required in a prospectus? • To help make an informed assessment of: • the assets of and liabilities, financial position, profits and losses and prospects of the corporation; • the rights attaching to the shares of the corporation; and • the merits of participating in the Company and the extent of the risks involved in the participation.

  15. Listing Requirements (ASX)(cont) • Recent ASIC approach • Focus on clear, concise and effective disclosure: plain language, active voice, short sentences, avoid repetition, explain complex information, including technical terms • Key information about the issuer and offer in a balanced way • More focus on key risks, specific rather than general risks and balance of benefits and risks • Explaining business model- more disclosure about directors and key managers

  16. The Listing Process

  17. ASX or APX? • ASX (Australian Securities Exchange) • A licensed operator of markets and clearing and settlement facilities in Australia • Top 10 measured by market capitalisation • APX (Asia Pacific Stock Exchange) • APX is a securities exchange with a market licence granted by ASIC , aiming to trade in Australian dollars & RMB • APX is in the process of developing a Chinese RMB board, will assist: • APX listing companies to raise capital using Chinese RMB; and • Chinese investors to trade in RMB via online trading platform for APX listed companies.

  18. ASX or APX? (cont) • Why Sponsors are required by APX for its Listees? • A listee must include certain documents signed by an APX Sponsor • APX will liaise between the potential listee and the Sponsor • What Sponsors do? • During the first two years after IPO, the listee must engage a sponsor to advise it in relation to its obligations under the APX Listing Rules

  19. Criteria of ASX vs. APX

  20. Thank you MICHAEL HANSEL, PARTNER Phone +61 7 3024 0328 Email m.hansel@hopgoodganim.com.au www.hopgoodganim.com.au

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