ASX Guidance Note 1 update

On 16 May 2025, ASX published updates to its guidance for entities seeking to apply for admission to the ASX in Guidance Note 1. The updated guidance takes effect from 30 May 2025.

ASX has stated that the updates provide ‘greater transparency to potential early-stage technology, biotechnology and medical technology listing applicants’ and that the proposed updates are to align the Guidance Note with current ASX admission practices which were not previously articulated in the Guidance Note. ASX also states that it is making other changes to reflect existing practices and policies.

One of the most important changes is to include limits on the type of entities that are eligible to use ASX ‘fast-track’ listing processes which allows issuers to substantially shorten the time between prospectus lodgement and listing (from 6 weeks down to potentially 2). This change is most likely to impact early-stage businesses, and we think is an unfortunate change, in particular in a climate where ASIC is looking at ways to support public capital markets by streamlining the IPO process (as discussed in ASIC’s Discussion paper on Australia’s evolving capital markets (ASIC Discussion Paper)).

The changes to the Guidance Note are discussed below.

Key changes to Guidance Note 1

Fast track process eligibility

Under a standard listing process, ASX would typically commence its review of the listing application of an entity seeking listing on ASX when the entity lodges its prospectus with ASIC. ASX would typically take up to 6 weeks to review the application and provide its listing decision, after which the applicant’s securities will be quoted and commence trading on ASX.

The fast-track listing process is designed to help shorten the period between lodgement of the prospectus with ASIC and commencement of trading of the entity’s securities on ASX. This is very important for issuers in a typical IPO process because it reduces the period of time that institutional IPO investors who pre-commit to take shares (supporting underwriting) are ‘on risk’ between the bookbuild for shares (which usually occurs pre-lodgement) and trading commencing. The longer the period of risk where the overall market may decline, the greater the discount IPO investors may require when committing to acquire shares in the IPO. The longer period also means the underwriting agreement is on foot for longer, increasing the possible risk of termination (for example through standard ‘market fall’ clauses which protect the underwriter should there be a material fall in a specified index). These issues are all acknowledged by ASX in its submission to ASIC in response to the ASIC Discussion Paper (ASIC’s media release and submission is available here).

The fast track process substantially improves this position and involves ASX front ending its review of the entity’s listing application based on a draft version of the listing application and associated documents, including a pathfinder prospectus. By commencing its review before formal lodgement, ASX will generally be able to provide its decision and commence official quotation of the entity’s securities on ASX approximately 2 weeks after the entity lodges its prospectus with ASIC and its formal listing application with ASX.

In its most recent amendments, ASX proposes to introduce the following criteria that entities will need to satisfy in order to be eligible to use the fast-track process:

1. Minimum market capitalisation threshold
   
   In section 2.6 of GN1, ASX has indicated that it will only agree to the fast-track process where the relevant entity is expected to have an initial market capitalisation at quotation of at least $100 million.
    
2. Escrowed securities
   
   Also in section 2.6, ASX indicates that it intends to preclude entities with securities that will be subject to ASX imposed escrow from accessing the fast-track process.
   
   ASX imposed escrow applies to entities admitted under the ASX “assets test” (as compared to the “profits test”) and who do not have sufficient tangible assets or an acceptable track record of revenue or profitability.¹

The second of these changes is arguably the more important, given that many entities come to market with a market capitalisation of at least $100 million but have ASX imposed escrow. The change is expected to particularly impact emerging and early-stage companies, for example, companies in the technology and life sciences sectors which are typically pre-profit at the time of seeking listing on ASX. This is unfortunate given the ASX’s marketing efforts often target such companies for listing, and in light of ASIC’s concerns about the health of equity markets mentioned above.

In any discussions with ASIC arising from the ASIC Discussion Paper, we would urge ASX to consider ways it can contribute to shortening the ‘on risk’ period, including reconsidering its revised position in Guidance Note 1 that all entities which have mandatory escrow are precluded from the ‘fast track’ process.²

'Appropriate structure and operations’

Condition 1 of Listing Rule 1.1 requires that the structure and operations of an entity seeking admission must be appropriate for a listed entity. In its proposed updates to Guidance Note 1, ASX has also introduced the following examples of where an entity may not have a structure and operations appropriate for a listed entity:

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

The first example replaces the previous guidance used by ASX, which described the entity’s ‘proposed business’ being ‘little more than a concept or idea’ as an example of where its structure and operations may be inappropriate. ASX has clarified that decisions about whether an entity’s business is at ‘too early a stage for listing’ are made on a case-by-case basis, based on the type of business and the information ASX has to hand at the time.

In relation to this, ASX has outlined the following list of general positive and negative factors that it will take into account for early-stage technology companies:

With respect to early-stage companies from the biotechnology or medical technology sector, ASX has communicated that it will consider similar factors but apply additional scrutiny to whether the applicant has secured the key licences or government approvals required to operate its business. Furthermore, where an applicant from the biotechnology or medical technology sector is not yet in a position to generate revenue, ASX will be particularly focused on the status of any planned or required clinical trials.

Regarding the second example discussed above (where the entity 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), this is a new addition and seeks to defend against the risk of listing entities that do not have substantial operational control or active involvement in their key assets or businesses. However, there are some notable examples of previous listings of this kind. It remains to be seen how ASX will approach this where there are clear mechanisms available for the listed entity to receive and disclose material information regarding the investment and clarity around the listed entity’s rights to influence it.

Other changes

ASX has made a number of other changes, some of which are likely to impact IPOs and others which will be of less importance. For example:

• ASX has increased the period which it has to review information regarding satisfaction of listing conditions to 3 business days. This is longer than what we consider is current practice so is likely to elongate the time between lodgement and listing; and
   
• ASX has clarified that the initial listing fee is payable when an applicant lodges a draft listing application as part of the ‘fast-track’ process noted above – in our experience this has been the practice for some time so the changes just clarify the Guidance Note.