Doing an IPO in Australia
MICHAEL HANSEL, PARTNER
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
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
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 $2,608 million, the
second best quarter in the past five years
Improved IPO Landscape
Year
Amount
raised ($m)
Floats
Winners
Losers
Square
2012
1265
44
20
21
3
2011
1558
103
27
72
4
2010
7975
94
59
32
3
2009
2985
40
22
17
1
2008
2018
72
3
69
0
Star floats – 2012^ (gain percent)
Pura Vida Energy
290.00%
Equamineral Holdings
225.00%
Boadicea Resources
Bora Bora Resources
Breaker Resources
195.00%
125.00%
85.00%
Biggest raising (amount raised $ m)
Shopping Centres Australasia
472.0
Fonterra Shareholders' Fund
414.0
Calibre Group
75.0
Armour Energy
75.0
Cuesta Coal
24.1
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
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
Listing Requirements (ASX)
Min market capitalisation
Profit or Asset Test
Profit Test
A$1million net profit over past 3 years +
A$400,000 net profit over last 12 months
$3 million Net Tangible Assets1; or
Asset Test
A$10 million market capitalisation2
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.
Listing Requirements (ASX) (cont)
Min number of shareholding
Number of Shareholders1
Free Float2
300
Not less than 50%
350
Not less than 25%
400
No minimum free float
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)
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
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
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.
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
The Listing Process
Step 1
Pre-IPO Preparation
•
•
Step 2
Talk to Securities
Exchange
•
Preliminary stages – Security Exchange provides guidance on general IPO
process
•
•
Advanced stages – guidance on Listing Rules of the Security Exchange
Detailed review of Company carried out by: Company Management & Board,
Advisers, Underwriters, Brokers & Sponsor
•
Prospectus lodged with ASIC
•
•
Listing application must be lodged with Securities Exchange within 7 days of
Prospectus lodgement with ASIC
Average 6 to 8 weeks
•
•
Up to 3 months under Corps Act
Securities Exchange Letter of Approval sent to Company
•
Subject to conditions, including completion of capital raising
•
Company satisfied all conditions set out in Securities Exchange approval letter & is
admitted
•
Official quotation to occur approximately 2 days after admission
Step 3
Prospectus preparation
& due diligence
Step 4
Lodge Prospectus &
apply to list
Step 5
IPO Offer Period
Step 6
Receive approval to list
from Securities
Exchange
Step 7
Admission & Trading
Appoint and consult with advisers: Underwriters, Brokers, Corporate advisers,
Accountants, Lawyers & Sponsor
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.
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
Criteria of ASX vs. APX
Criteria
ASX
APX
Size requirements
A market capitalisation of at least A$2m
Information requirements
Net tangible assets at the time of admission of at least
A$3million or a market capitalisation post-IPO of at least
A$10million
300 holders who each hold shares with a value of at least
A$2000; or 400 shareholders and at least 25% of the
company’s shares are held by unrelated entities
Prospectus or information memorandum
Working capital requirements
at least $1.5million
Min $300,000
Directors requirements
to satisfy ASX that each director or proposed director is of
good fame and character:
is of good fame and character;
Spread requirements (number
of shareholders)
a. a Police/CrimTrac criminal history check(If not an
Australian resident, equivalent criminal history and
bankruptcy checks to be supplied for each country in
which the director has resided over the past 10 years);
At least 50 holders who each hold shares with
a value of at least AU$2000 and at least 25%
of securities holders are unrelated
Prospectus or information memorandum
must have the appropriate expertise and
experience.
APX: declaration and undertakings
b. an Insolvency and Trustee Service Australia bankruptcy
check; a statutory declaration;
c.
Sponsor requirement
Profit test
Operating History
not the subject of any criminal or civil proceedings;
d. Not the subject of any disciplinary action etc.
None required
Aggregated gross profit for the last 3 years no less than
A$1million or the consolidated gross profit for the last 12
months must be more than A$400,000
3 years
Required to appoint a sponsor
Nil
3 years financial statements with the last
within 6 months; term can be shortened if
credible case is put forward to APX.
Thank you
MICHAEL HANSEL, PARTNER
Phone +61 7 3024 0328
Email m.hansel@hopgoodganim.com.au
www.hopgoodganim.com.au