THE Australian Stock Exchange’s listing rules are hindering capital raisings by smaller companies, according to West Perth investment banker John Kenny.
He believes the ASX should relax its requirement for companies pursuing an IPO to have at least 400 shareholders and to issue shares at a minimum price of 20 cents.
“A lot of companies can raise the money they need but often the hard part is getting the last 100 shareholders so they can meet the listing rules,” said Mr Kenny, a director of investment bank Chatsworth Stirling.
He said the reality was that many companies breached these rules after they were listed.
“People can sell their shares after the float so companies end up with less than 400 shareholders,” Mr Kenny said.
“And there are plenty of companies that raise money at less than 20 cents after they are listed, and nobody has got a problem with that.”
He added that companies listing on the London Stock Exchange’s Alternative Investment Market (AIM) do not have to meet these conditions.
Chatsworth Stirling and its sister company, law firm Blakiston & Crabb, have been actively involved in capital raisings for the past decade.
Recent transactions include the IPO of Vulcan Resources, the recapitalisation of Australian Development Capital Fund and the backdoor listing of Deep Yellow via Julia Mines.
Chatsworth director Michael Blakiston believes there is plenty of money looking for the right investment opportunity.
“If somebody walked through the door with a great exploration prospect or a great technology, there is no doubt we can raise private equity to take it to the next stage,” Mr Blakiston said.
He cautioned that technology inventors might need to adjust their expectations.
“Often the inventors think they will be swamped with money. They can also be impassioned with the technology,” Mr Blakiston said.
“They need to focus on the commercial opportunities because investors want to see that the technology can be brought to market.”
Attracting a cornerstone investor was a “big uptick” for companies wanting to list on the ASX, he said. Having the right people, with a successful track record, could also make a big difference.
Mr Kenny said an AIM listing was a viable option for some Australian companies but they needed to provide ongoing investor support.
“You can’t just raise the money and then come back here and forget about it,” he said.
“You need someone on the ground in London selling your story every day.”
Mr Kenny said the number of IPOs on the ASX would be boosted if the ASX reduced the minimum shareholder spread.
A minimum of 200 shareholders would be sufficient to deliver the liquidity that the ASX wanted, he said.
Another useful change would be the adoption by the Federal Government of ‘flow through’ shares, which would allow shareholders to claim exploration expenses as a tax deduction.
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