Unchanging ASX at risk to private markets | Australian Markets

Without daring reforms that stability governance with flexibility, the Australian Securities Exchange (ASX) dangers ceding more of Australia’s growth story to private markets and offshore exchanges, in accordance to the chief chairman of MainMarkets, Jamie Green.

In doing so, Green famous that Australia’s initial public offering (IPO) market is one of ites deepest slumps in more than a decade with the slowdown pushed by a potent combine of world turbulence, regulatory hurdles and aggressive disadvantages towards worldwide exchanges.

He stated it represented a excellent storm in circumstances the place corporations can now raise vital capital privately with out the prices, delays and scrutiny that include a public itemizing.

“In some cases, ASX rules are simply less founder-friendly than those in other major markets like the prohibition against dual‑class shares, making the ASX less attractive to founder‑led growth firms,” Green stated.

“In the previous, the ASX was a natural vacation spot for early-stage corporations in sectors like mining, tech and biotech. The model was simple with the mining corporations itemizing early to fund exploration, whereas tech corporations might spin out promising mental property into a listed vehicle to raise analysis and development capital. This course of not solely introduced traders into high-growth ventures early but in addition made the ASX a recognised hub for speculative and growth-oriented performs.

However, over time, the ASX elevated its scrutiny and toughened its standards for admission. “This has been a slow tightening of the screws,” he stated. “The smaller end of the market, mainly companies under $100 million market cap, has been hit the hardest. These are the firms that once relied on public markets for early growth funding. Now, they’re increasingly turning to private investor capital instead.”

Green stated the numbers underscore the pattern. In 2024, whole IPO proceeds had been simply $2 billion, with a staggering $1.3 billion coming from a single itemizing. “When one company accounts for almost two-thirds of total IPO capital raised, you know the market has lost breadth,” Green stated.

He stated that confronted with shrinking volumes, the ASX has rolled out some adjustments to its Listing Rules efficient 30 May 2025, marking the primary vital replace since 2019. These revisions codify some long-standing practices, make clear the expectations for early-stage candidates and goal to streamline the itemizing course of.

One of the more high-profile proposals is to cut the time between prospectus lodgement and itemizing from six weeks to simply two which might enable earlier participation by traders.

On paper, the reform guarantees sooner entry to market however Green stated two key restrictions restrict its attain. “First, it only applies to companies with an expected market cap above $100 million. Second, it excludes any company with ASX-imposed escrow. These two conditions will exclude most early-stage mining and tech companies,” he famous. “Ironically, these are exactly the companies that would benefit most from a faster, less costly listing process.”

Green stated one other doubtlessly transformative change into consideration is permitting dual-class share constructions, aligning the ASX with exchanges in London, New York and Hong Kong. Under this model, completely different courses of shares carry completely different voting rights, typically granting founders enhanced control whereas limiting public shareholders’ affect.

Proponents argue that this retains visionary founders targeted on long-term objectives with out the risk of hostile takeovers or short-term market pressures. Critics counter that it entrenches control, undermines governance and dangers sidelining minority traders.

“The concept is controversial,” Green stated. “While some itemizing candidates view twin‑class as a aggressive differentiator, traders warn that it cements control within the fingers of a few insiders, weakens accountability and elevates the risk of founder entrenchment.

“Proponents argue that dual-class shares allow visionary founders and charismatic leaders to pursue long-term objectives without succumbing to short-term market pressures.  Past scandals involving strong outspoken founders both in Australia and overseas have heightened scepticism of this argument.”

Investor advocacy teams emphasise that Australia beforehand deserted twin‑class shares. They urge that any re‑introduction should include strong oversight, obligatory sundown clauses or voting thresholds and clear disclosure to defend non‑founder shareholders.

The US expertise is fascinating. Alphabet Inc., the father or mother company of Google, operates below a three-class share construction. Meta Platforms (previously Facebook) has a dual-class share construction granting CEO Mark Zuckerberg outsized voting energy. News Corp additionally operates below a dual-class share construction that provides the Murdoch household vital control over the company. Berkshire Hathaway, led by Warren Buffett, utilises a two-class share system with Class A shares possessing a lot better voting energy than Class B shares. By distinction, Tesla and Amazon wouldn’t have a dual-class share constructions. Tesla and Amazon each have a single-class share construction, that means every share carries equal voting rights.

For Green, the trail ahead is obvious. “The ASX must introduce flexible, targeted reforms that recognise the realities of Australia’s issuer base.”