Australian Securities Exchange (ASX) Guidance Note 1 Update – how will future applications for listing be impacted?

ASX recently made a series of updates to Guidance Note 1 – Application for Admission (GN 1), including but not limited to, qualifications to the fast-track process and guidance in respect of entities within the technology, biotechnology and medical technology sectors. 

This article expands upon these key updates to provide guidance to entities which may be seeking to list in the future, noting that ASX expects that applicants will be aware of and comply with the current requirements.

Criteria to qualify for the fast-track process

ASX will generally not commence its review of a listing application until the applicant has filed its prospectus or product disclosure statement (PDS) with ASIC – this will often mean the applicant will not be notified of ASX’s decision for 4 – 6 weeks after the application is lodged.

In circumstances where an entity is proposing to use a ‘pathfinder’ prospectus or PDS, ASX may agree to ‘front end’ its review of the entity’s listing application to speed up the review process. However, ASX has now set certain criteria which an applicant must meet before it can be considered for the fast-track process: 

1. $100 million market cap: The applicant must have an initial market cap at quotation of at least $100 million; and 

2. Escrow securities: The applicant cannot have any securities which are subject to ASX imposed escrow on issue at the time it is admitted to the official list (generally meaning that such entities will have to apply under the ‘profits test’ where ASX does not impose escrow). 
   

Whilst the fast-track process will continue to be a useful option for entities seeking to list on an expedited basis, entities should be mindful of the new criteria and factor this into their anticipated listing timeline. 

Appropriateness for listing and the technology sector

An entity which is seeking admission to the official list must have a structure and operation which is appropriate for a listed entity. 

As part of the updates to GN 1, ASX has referred to additional examples which indicate that an entity may not have an appropriate structure and operation to qualify as a listed entity, including circumstances where: 

1. the applicant’s business is in its early stages and, in ASX’s view, has not developed to a point where listing is appropriate; and

2. the applicant is not an investment entity and has a non-operating or minority interest in assets or businesses that form a significant part of its listing proposition.

Early-stage technology applications

For early-stage technology applications, ASX has noted that it will account for a number of positive and negative factors when assessing whether the entity’s business has developed to a point where listing is appropriate: 

Issue	Positive factors	Negative factors
Background of entity	The business has been developed and grown by its promoters over a period of time.	The business was recently acquired by its promotors and there is no continuity of key personnel.
Development	Material cash has been spent over several years developing the business.	There has been little or no cash spent on development.
Revenue and commercialisation	There is a market for the product and commercialisation opportunities, as evidenced by:  revenue of $1 million or more in the last 12 months; or  binding agreements for sales of $1 million or more in the next 12 months.	No revenue or binding agreements to generate revenue.
Ownership of intellectual property	Intellectual property rights granted or applied for in each relevant jurisdiction and target market.	No intellectual property rights granted or applied for in each relevant jurisdiction and target market.
Investment history	The entity has conducted material seed raisings from independent parties.  Funds raised in seed raisings have been at prices demonstrating a decreasing level of risk. Funds raised in seed raisings directly contribute to the advancement of the technology and business.	The entity has conducted no material seed raisings.  Seed raisings have been conducted at nominal prices.  Seed raisings have been conducted without subsequent and meaningful development of the technology and business.

Biotechnology and medical technology applications

Where an applicant from the biotechnology or medical technology sector is not yet able to generate revenue, ASX will be focused on the status of any planned or required clinical trials when considering its listing application, having regard to: 

1. whether the applicant has completed, commenced or will be ready to commence clinical trials promptly after listing; and 

2. if trials will be commenced after listing, whether the applicant has ethics approval, contracts, protocols and medical arrangements in place to conduct trials promptly after listing.
   

The team at Palisade Corporate have extensive experience in advising entities throughout the listing process. If you have any queries or require further advice in relation to listing on the ASX, please do not hesitate to contact our office on (08) 6211 5000 or info@palisadecorporate.com.au and we would be happy to discuss. 

By Monique Moro, Solicitor