ASIC’s discussion paper published in February this year confirmed that the number of publicly listed companies has declined in recent years, falling to a 20-year low of just 29 IPOs in 2024. The highly regulated process for listing on the ASX has long been subject to criticism by the Australian market, though in recent years the floodgates have opened with more and more companies looking for equity capital alternatives.
In an effort to tackle this decline, ASIC put forward a string of changes to its ASX listing process for companies last month. The corporate watchdog has said that ‘companies could reduce the time needed to take a company public on the ASX by one week.’ A one week time saving may not seem ground-breaking, yet this is the first in a slew of reforms ASIC will seek to roll out over a two-year trial period to help reverse the decline in IPOs in the Australian market.
Whilst reducing regulatory friction on the listing process is welcome, in this article we suggest that more is required to restore the status of the ASX as a popular destination.
As we wrote about in our article on Carrying on Business Downunder, Australia is the 12th largest economy in the world, and, despite a population of less than 27 million people, the average net worth of each individual ranks 5th globally and 2nd in the Asia Pacific region[1]. This wealth has historically made Australia an attractive market for business.
The Australian Securities Exchange (ASX) is the prime stock market in Australia. It is an electronic trading platform with over 2,200 listed companies and a combined market value exceeding $1.5 trillion. The ASX ranks in the top 15 listed markets globally by market size.
The ASX is historically known for its sector strengths in resources, energy and financial services. Not long ago it had an appeal to technology and innovation-driven businesses, including through its ASX All Tech Index and tailored listing pathways for early-stage companies.
For companies listing in Australia, the ASX can serve as a strategic move to access global investors and the Asian market, while benefiting from a stable and reputable regulatory environment.
The listing process involves seven major steps, and in total, the process typically takes between 20 and 27 weeks.
The company appoints a team to assist with the IPO, including as bare minimum a manager, accountant and lawyer.
Due Diligence: The company compiles accurate and complete financial records, legal documents, and operational data, including audited financial statements covering the last three financial years.
Drafting of Prospectus: Under the general disclosure test[2], this must contain all information investors and their advisers would “reasonably require to make an informed assessment” about the investment.
The Corporations Act limits advertising an IPO before the prospectus is lodged with ASIC. Activities with institutional investors are exempt, such as IPO roadshows with investment bankers.
Prospectus is lodged with ASIC, starting an ‘exposure period’ of 7 days when the prospectus is made publicly available for review and comment. This can be extended by 7 days if required by ASIC.
The formal listing application must be lodged with the ASX within seven days of the lodging of the prospectus. The ASX assesses whether the company satisfies the relevant admission criteria.
The company may offer to retail investors after the exposure period generally for between one and four weeks. Shares are then allocated and funds are raised according to the needs in the prospectus.
ASX grants final approval for the company’s shares to be quoted. The company debuts on the ASX and its shares begin trading publicly.
From this point on, the company is subject to ongoing obligations under the ASX Listing Rules, including continuous disclosure requirements and periodic financial reporting.
Companies will look to list on the ASX in order to raise significant funds which can support growth, expansion, or debt reduction, while also obtaining a transparent, market-based valuation of the business. Listing also enhances a company’s visibility, credibility, and brand recognition with investors, customers, and partners both in Australia and internationally. Additionally, being listed can facilitate future capital raisings and support strategic opportunities such as mergers, acquisitions, or entering new markets.
In this sense, an IPO also provides liquidity for existing shareholders and may provide an opportunity for founders to exit the business and realise some (or all) of their ownership stake. Often, founders will remain involved in growing the company post-IPO despite exiting some of their ownership. This can be an attractive alternative to other forms of exit, such as a trade sale – where a buyer will typically acquire 100% of the shares, resulting in a full exit for founders and a restructuring of the business post-sale – or a private equity (PE) buyout – where a PE firm acquires a controlling interest in the company, often involving restructuring and a back-seat approach to governance and decision-making for founders.
Market Uncertainty
There are several factors that have contributed to the low number of listings in recent years. At the top of the list is market uncertainty. Global events such as the pandemic and international conflicts, and their flow on effects including inflation, rising interest rates and economic slowdowns have made investors more risk-averse and discouraged companies from listing.
Limited Capital Pools
Some companies, particularly in industries such as technology or raw resources, have chosen to list on larger international markets or seek dual listings with overseas exchanges to access larger capital pools and more favourable market conditions, diverting potential listings away from the ASX. This is certainly the case for Atlassian, which listed in New York.
Cost and Regulatory Complexity
Listing on the ASX also involves significant upfront and ongoing costs, as well as complex regulatory and disclosure requirements. These requirements are subject to a high degree of regulatory discretion and have been criticised for being “opaque”. For smaller companies and startups, this can be a deterrent, particularly when compared to private capital options that offer funding with fewer constraints.
Difficult Financial Thresholds, especially for Tech Companies
Finally, the profit and assets tests for companies to meet the ASX’s admission criteria have been criticised for being difficult to meet in the current market. In summary, these tests require:
Since most tech companies, especially SaaS and other platform businesses, prioritise growth over short-term profitability, they are more likely to operate at a loss in their early years while scaling the business. Additionally, a net tangible asset valuation of $4m will be difficult to meet for companies who rely on intangible assets for value.
ASIC Reforms
As part of the changes announced by ASIC, the regulator will now allow companies to send a preliminary or pathfinder prospectus at least two weeks before formally lodging it for review, meaning that ASIC will not need to extend the exposure period after formally receiving the prospectus, “other than where material new information comes to light or is included”. This is intended to be an informal review in an effort to reduce deal execution and the effect of market volatility risk prior to the company’s shares trading on the ASX.
The changes could reduce the time needed in order to take a company public by one week, and form the first changes of a two-year period of modifications to the IPO process in an attempt to reverse a decline in listings in Australia.
Further changes are expected to be announced over the coming months, including more dramatic changes to rules that govern IPOs. These changes are being marketed as an enticement for home-grown companies to consider an Australian IPO, including software unicorn Canva, which is reportedly considering floating on the NASDAQ.
International Regulatory Reforms
In recent years, the US, UK, EU, Canada and NZ have overhauled their market regulations to entice companies to list on the public exchanges. By way of example:
Shortening the time period for ASX listing by a week is welcome. But it is generally agreed that this alone will not create a stampede of companies wanting to list downunder.
Regulatory reform of public markets in the US, UK, EU, Canada and NZ have shown what can be done to make public exchanges more appealing. Australia seems set to follow a similar pathway over the next 12 to 24 months to become more attractive.
Are you looking to build a business geared towards an IPO? For specific advice on getting the best result, please contact us below. Edwards + Co Legal provide corporate legal advice to modern Australian businesses.
[1] UBS Global Wealth Report 2024.
[2] Section 710 Corporations Act.
[3] Danny Tricot etc al., ‘New UK Listing Rules Come Into Force’ Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates (Article, 29 July 2024) < https://www.skadden.com/insights/publications/2024/07/new-uk-listing-rules-come-into-force#:~:text=On%2029%20July%202024%2C%20the,segment%20are%20set%20out%20below.>.
[4] ‘Introducing the European Common Prospectus’ Euronext (Article, 25 April 2025) <https://www.euronext.com/en/news/introducing-european-common-prospectus>.
[5] Igor Drinkovic, Mark Stuart, ‘Prospective financial information soon to be optional for initial public offers’ MinterEllisonRuddWatts (Article, 21 May 2025) <https://www.minterellison.co.nz/insights/prospective-financial-information-soon-to-be-optional-for-initial-public-offers>.
