URGENT UPDATE: The Australian Securities Exchange (ASX) is facing mounting pressure to overhaul its listing rules in response to alarming investor concerns. Helen Lofthouse, the ASX CEO, must act swiftly to protect investors from companies exploiting loopholes in the current regulations, which critics argue are outdated and ineffective.
Investor dissatisfaction has surged after a series of controversial transactions that sidestep existing listing rules, including the proposed tie-up between Seven West Media and Southern Cross. These developments underscore the urgent need for reform to restore balance and ensure greater shareholder rights.
Since the ASX’s last significant rule changes in 2017, there have been multiple incidents where companies have received questionable waivers. For instance, Sandfire Resources acquired a Spanish mine for $2.57 billion, raising over $1.2 billion in equity, all while circumventing essential shareholder approval mechanisms. This transaction, executed amid the COVID-19 pandemic, highlights the pressing need for a shareholder vote on substantial acquisitions.
The ASX’s review of listing rules, anticipated to be unveiled later this month or early November 2023, is a pivotal moment for the exchange. It represents a potential turning point in favor of investors, particularly in light of the poor track record of many ASX boards in managing large-scale mergers and acquisitions. Experts argue that a 25 percent threshold for shareholder approval on new share issuances—similar to requirements in Canada and South Africa—should be implemented to protect investors from substantial dilution.
“The status quo cannot continue,” said a leading fund manager, emphasizing the need for immediate reforms.
The ASX’s previous stance on shareholder approvals, which deemed such requirements too costly for companies, is increasingly being challenged. Stakeholders believe that requiring approval for any share issuance exceeding 25 percent of existing capital is a necessary safeguard for shareholders, particularly as transactions become larger and more complex.
With heightened investor activism on the rise, calls for amendments to company constitutions are gaining traction. Fund manager Allan Gray is advocating for changes at Orora, aiming to ensure that no shares equivalent to 25 percent or more of its stock can be issued without shareholder approval. This movement reflects a broader trend toward enhancing shareholder rights across the ASX.
Meanwhile, the ASX is under scrutiny from the Australian Securities and Investments Commission (ASIC), which is closely monitoring the listing rule review process. This scrutiny comes amid other challenges facing the ASX, including ongoing litigation with ASIC.
The ASX’s executive-level working group, led by Lofthouse and including key stakeholders, is preparing to release a consultation paper that will spark further debate and submissions from investors. Given the emotional and financial stakes involved, it is expected that the upcoming review will attract significant attention and diverse opinions.
As the ASX prepares to address these critical issues, investors and stakeholders alike are urged to stay tuned for updates. The outcomes of this review could reshape the landscape of Australian financial markets and bolster investor confidence in the future.
In summary, the ASX must act decisively to overhaul its listing rules before further transactions exploit existing loopholes. The time for change is now, and the eyes of the investment community are firmly focused on the ASX’s next steps.
