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Alternative Funding Sources for Businesses

ASX – Australia Stock Exchange

ASX – Australia Stock Exchange

About ASX

ASX is one of the leading exchange groups in the Asia Pacific region.

  •  We operate a fully integrated exchange across multiple asset classes – equities, fixed income, derivatives and managed funds
  • We service a wide range of retail, institutional and corporate customers, directly and through intermediaries
  • We offer a broad range of services that allow our customers to invest, trade and manage risk. This includes listings, trading, post-trade services, and technical and information services
  • We operate infrastructure that supports the stability of Australia’s financial markets and is critical for the efficient functioning of the nation’s economy, economic growth and position in the Asia Pacific region.

Why List with ASX?

Listing with ASX gives your company access to capital from a broad network of investors in Australia and across the world, driving growth opportunities as you join a very select group on the global stage.

Australia has the world’s third largest pool of investable funds and ASX is consistently ranked in the top five exchanges globally for raising capital.

ASX offers access to capital in the world’s fastest growing region, within a robust regulatory environment, in a country that has recorded 23 years of uninterrupted economic growth.

Access a deep pool of capital

Asia Pacific’s largest pool of investable funds. With access to investors in Australia and across the world, ASX gives your company the ability to raise initial and ongoing capital to help fund future growth.

Australia has the world’s third largest pool of investable funds and the largest in the Asia Pacific region. The size and growth of those funds is underpinned by a mandatory superannuation scheme and associated tax benefits.

At the same time, around 45% of investment in ASX listed companies comes from international investors in Asia, Europe and North America. With a large and diverse investor base, ASX provides companies with an opportunity to join the global capital stage.

Join a leading group of listed companies

ASX has a diverse group of over 2,000 listed companies across a range of sectors and geographic regions. With listing rules that are tailored to growth companies, ASX has a long history of listing both early stage and mature companies. Total market capitalisation was $1.6 trillion as at 31 December 2014.

Is Listing for You?

Identify the need
Before listing your company on a public market, you’ll need to answer some questions about the future of your business. Your first step is to determine whether listing is appropriate, taking into account your company’s long-term strategic goals. You should consider both the advantages and the challenges.

Leverage the advantages of listing
The world’s stock exchanges have been listing companies for hundreds of years. There are a multitude of benefits that can enhance your business.

Access to capital for growth
Whether your company’s growth strategy is based on acquisition, organic growth or a combination of both, a listing gives you the opportunity to raise capital at the IPO stage, and throughout its listing to fund future growth. Follow-on capital raising for listed companies is greatly simplified, through reduced cost and time.

Currency for external growth
Listing on a public market facilitates acquisitions by providing ‘currency’ in the form of a more diversified and liquid share capital base. Shares can be used as a means of payment in the acquisition of another business instead of, or in combination with, cash.

Higher public and investor profile
Listing generally means your company’s activities will receive greater media coverage, widening awareness of your products or services. Your company may also be covered in analyst reports and included in a share market index. This heightened profile may help sustain demand for your company’s shares and increase the standing of your business within its industry.

Institutional investment
Listed companies can attract professional and institutional investment due to increased transparency (availability of information) and trading liquidity (ability to buy and sell shares easily). Institutional investors can bring increased business credibility, stability and wider business networks. Having institutional shareholders may also increase your likelihood of getting capital supply in the future.

Improved valuation
Being listed generates an independent valuation by the market. The market values listed shares based on available information.

Greater efficiency
The requirement for more rigorous disclosure can improve systems, controls and management information, leading to greater operating efficiency of the business.

A (secondary) market for your company’s shares
Post-listing trading stimulates liquidity in your company’s shares, and gives shareholders the opportunity to realise the value of their holdings. This can help broaden your shareholder base, because investors know that they can readily enter and exit their holdings. It also facilitates further capital raising.

Alignment of employee/management commitment
Being listed simplifies the process and increases the benefit of remunerating your employees with shares. It can help align the interests of employees with the organisation’s goals by increasing their long-term commitment. Incentive schemes give employees an opportunity to share in your company’s growth, which helps to attract and retain high-quality employees.

Reassurance of customers and suppliers
Companies listed on ASX can find the perception of their financial and business strength improved. The rigorous due diligence process conducted as part of the listing process, and ongoing compliance with continuous disclosure rules can reassure companies that deal with your company.

Weigh up the challenges

In deciding whether listing is appropriate for your company, you should also consider the potential obligations and costs of being a publicly listed company.

Susceptibility to market conditions
No matter how well a business is run, the price and liquidity of its shares can be affected by market conditions beyond its control, including market rumour, general economic conditions or events within the same industry.

Disclosure and reporting requirements
Becoming listed involves a much higher degree of disclosure and corporate governance than required of a private organisation. This can involve additional management time and investment in information and compliance systems.

Media exposure
Heightened media exposure can be a benefit of listing, but there are times that greater media exposure may be unwelcome.

Costs and fees
There are costs involved in an IPO, maintaining a listing and raising additional capital. The total costs of listing are likely to include underwriting or brokerage fees, accounting, legal and other professional fees, as well as prospectus costs and ASX listing fees. A later section of this booklet outlines the listing fees charged by ASX.

Reduced level of control
The sale of company shares inevitably involves ceding a degree of control to outside shareholders. This includes not undertaking certain corporate transactions – particularly those involving directors and substantial shareholders – without prior approval of shareholders. Depending on the proportion of equity original investors retain, there’s also the possibility your company may be subjected to takeover bids.

Management time
Being listed, and in particular the IPO process, can use up considerable management time which might otherwise be directed to running the business.

Director responsibilities
Management and directors of a private company may find they simply don’t like the implications of running a listed business. Greater disclosure of salaries, restrictions on share dealing, and the need to invest time and money in investor relations are all additional responsibilities of a listed company.

Getting prepared

Directors and managers need to examine a wide range of factors to gauge the organisation’s readiness for listing. Professional advisers are usually used to help understand matters, which include:

  • What are the organisation’s long-term goals and strategies?
  • Are there skill gaps at senior management and board level? If so, how will these be filled in a listed environment?
  • Are directors and senior managers prepared for greater disclosure, accountability and transparency?
  • Is the organisation’s culture ready for listing?
  • Are there any tax considerations?
  • Are strategies in place to retain key employees and customers?
  • What initiatives (e.g. acquisitions) need to be completed before listing?
  • Are the operational, financial and management information systems robust enough for a listed company?
  • Have you considered corporate governance principles and recommendations set out by the ASX Corporate Governance Council?
  • Is the timing right for a listing, in terms of the business and market conditions?
  • Do you understand what investors and the market require from you?
  • Are you ready to open your company to the discipline of the capital markets?

www.asx.com.au

1 comment so far

Capital Team Posted on 7:57 pm - 10/02/2017

We help SME maximize its valuation, raising pre-IPO fund and taking it to the IPO level. Contact us.