A number of US companies have gone public in Australia as an alternative to a further private round in the US. While the ASX may not be an obvious alternative to US capital markets, there are a number of reasons why the it can be attractive:
- Large pool of investable funds – the pool of superannuation (pension) assets is disproportionately large compared to Australia’s population, with investible funds currently ~AUD4.1 trillion and forecast to grow to over ~AUD11 trillion by 2043.
- Publicity – the ASX is a great environment for attracting the attention of media, stock analysts and investors. Companies with revenue of less than USD100 million can attract public market capital in Australia. The "sweet spot" is for global companies with market caps of between AUD200 million to AUD5 billion.
- Index inclusion – the ASX is optimised for early stage growth companies, with a minimum market cap of ~USD350 million for entry into the S&P / ASX 300 Index and ~USD95 million for entry into the S&P / ASX All Tech Index.
- Strong investor demand – ASX is a single, main board listing venue only and is one of the world’s most active exchanges for IPOs. The ASX has been the leading exchange for "follow on" raisings for seven consecutive years (by volume).
What US companies can expect
While the path to an ASX listing is well established for US companies it does require experienced Australian and US legal counsel to help you navigate the challenges that inevitably arise when Australian securities laws and the ASX Listing Rules intersect with US securities and company law. Answers to some of the common questions that we are asked by US companies considering an ASX listing are below.
- What is traded? For US companies, CHESS depositary interests (CDIs) are traded on the ASX. CDIs are ownership interests (similar to ADRs) that are traded in the same way as shares, and holders are entitled to vote at general meetings and receive dividends.
- Can different classes of stock be listed? Generally, no. As part of the listing process it is customary to collapse the preference stack, with only common stock on issue at the time of listing. Supervoting shares may be permitted for foreign exempt listings.
- Is a prospectus required? An Australian prospectus is required for an IPO. Prospectus drafting is led by your corporate advisers and legal counsel.
- Can US persons trade on the ASX? Following listing, US investors will be able to sell their CDIs on-market, but will generally not be able to buy them on-market in the 12 months after listing. This restriction does not apply to Australian and other non-US investors.
- Can the employee stock plan continue post listing? Generally, existing employee incentive grants can continue unchanged post-listing. Minor amendments may however be required to the plan itself post-listing.
- What are the key listing requirements? Key hurdles include:
- Admission requirements – you must satisfy either:
- “profit test” – requiring minimum AUD1 million aggregate profit over the 3 years pre-listing and AUD500,000 consolidated profit over the 12 months pre-listing; or
- “assets test” – requiring minimum NTA of AUD4 million or a market capitalisation of AUD15 million.
- Audited accounts – audited (or reviewed) accounts for between two to three and a half years must be provided to the ASX (depending on whether you are admitted under the profit or assets test). The accounts may be prepared in accordance with US GAAP rather than IFRS.
- Shareholder spread & free float – minimum of 300 shareholders with a holding of AUD2,000 or above (affiliates and locked-up shares excluded). At least 20% of your shares must be held by non-affiliates and not subject to a lock-up.
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