ASIC’s latest Corporate Finance Update (Issue 23) highlights several important regulatory developments and reminders affecting IPOs, disclosure of non-IFRS financial information in fundraising documents and share buy-backs with control effects.

Faster IPOs through ASIC’s fast-track process

As part of a two-year trial, ASIC has launched an accelerated IPO process, ASX Fast-Track, for companies with a minimum market capitalisation of $100 million and no ASX-imposed escrow.

Eligible companies can now confidentially submit a near-final pathfinder prospectus or PDS to ASIC at least 14 days before formal lodgement. ASIC will aim to complete its review within this period, and generally will not extend the statutory exposure period unless material new information arises. This may shorten IPO timelines by up to a week, reducing execution risk.

Further, ASIC has adopted a no-action position allowing eligible companies to accept investor applications during the exposure period, aligning the treatment of prospectuses with PDSs. This is expected to simplify IPO administration and increase market efficiency.

Disclosure of non-IFRS financial information in fundraising documents

ASIC has reiterated its expectations for the use of non-IFRS financial information, such as pro-forma financial information and underlying or adjusted earnings, in fundraising disclosure documents. While permitted, this information must be:

• clearly defined and explained in the same section or page in which they appear; and
• not misleading or given undue prominence compared to IFRS-compliant metrics.

ASIC continues to observe inconsistent practices in how terms like ‘underlying EBITDA’ or ‘adjusted NPAT’ are presented. Issuers should refer to Regulatory Guides 230 and 228 for guidance and ensure appropriate transparency to retail investors.

Share buy-backs with control effects subject to scrutiny

ASIC has intervened in a proposed share buy-back transaction where non-participation by key executives would significantly increase their control.

In the relevant case, the CEO and CFO’s voting power would have increased from 27.8% to 70.2%, and from 11.8% to 29.8%, respectively. ASIC raised concerns over:

• inadequate and inconsistent valuation disclosures;
• lack of an independent expert report despite material control implications; and
• fairness concerns, as the CEO intended to vote in favour of a resolution that would substantially increase their control.

Following ASIC’s intervention, the company deferred the meeting, obtained an expert report, imposed a voting restriction on the CEO, and enhanced its disclosure. The buy-back price was also subsequently increased.

ASIC noted it would have sought orders from the Takeovers Panel had the issues not been addressed.

This article was written by David Naoum, Partner and Rustu Buyukcakar, Solicitor.