Doing an IPO in Australia
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Transcript of Doing an IPO in Australia
Doing an IPO in AustraliaMICHAEL HANSEL, PARTNER
What is an IPO?
The terms IPO, public offering, listing or floating are, by and large, interchangeableThese 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)
Breaker Resources
Bora Bora Resources
Boadicea Resources
Equamineral Holdings
Pura Vida Energy
85.00%
125.00%
195.00%
225.00%
290.00%
Biggest raising (amount raised $ m)
Cuesta Coal
Armour Energy
Calibre Group
Fonterra Shareholders' Fund
Shopping Centres Australasia
24.1
75.0
75.0
414.0
472.0
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
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.
Profit or Asset Test
Profit Test
A$1million net profit over past 3 years + A$400,000 net profit over last 12 months
Asset Test$3 million Net Tangible Assets1; or
A$10 million market capitalisation2
Listing Requirements (ASX) (cont)
Min number of shareholding
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)
Number of Shareholders1 Free Float2
300 Not less than 50%
350 Not less than 25%
400 No minimum free float
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 1Pre-IPO Preparation
• Appoint and consult with advisers: Underwriters, Brokers, Corporate advisers, • Accountants, Lawyers & Sponsor
Step 2Talk to Securities Exchange
• Preliminary stages – Security Exchange provides guidance on general IPO process
• Advanced stages – guidance on Listing Rules of the Security ExchangeStep 3 Prospectus preparation & due diligence
• Detailed review of Company carried out by: Company Management & Board, Advisers, Underwriters, Brokers & Sponsor
Step 4 Lodge Prospectus & apply to list
• Prospectus lodged with ASIC
• Listing application must be lodged with Securities Exchange within 7 days of Prospectus lodgement with ASIC
Step 5IPO Offer Period
• Average 6 to 8 weeks
• Up to 3 months under Corps ActStep 6Receive approval to list from Securities Exchange
• Securities Exchange Letter of Approval sent to Company
• Subject to conditions, including completion of capital raising
Step 7Admission & Trading
• Company satisfied all conditions set out in Securities Exchange approval letter & is admitted
• Official quotation to occur approximately 2 days after admission
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 APXSize 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
A market capitalisation of at least A$2m
Spread requirements (number of shareholders)
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
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
Information requirements Prospectus or information memorandum 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:
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);
b. an Insolvency and Trustee Service Australia bankruptcy check; a statutory declaration;
c. not the subject of any criminal or civil proceedings;
d. Not the subject of any disciplinary action etc.
is of good fame and character;
must have the appropriate expertise and experience.APX: declaration and undertakings
Sponsor requirement None required Required to appoint a sponsor
Profit test 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
Nil
Operating History 3 years 3 years financial statements with the last within 6 months; term can be shortened if credible case is put forward to APX.
Thank youMICHAEL HANSEL, PARTNERPhone +61 7 3024 0328Email [email protected] www.hopgoodganim.com.au