ASX concept release - SME, mid-cap and micro-cap equity market review

On 21 March 2011, ASX issued a "Concept Release" as part of ASX's SME, Mid-Cap and Micro-Cap Equity Market Review. The Review is seeking to question whether ASX's "one size fits all" approach to listing rules and trading systems is appropriate, and whether (and how) ASX could distinguish between the top 200 and smaller, less liquid stocks.

ASX is seeking feedback on a number of issues, including the following:

• are there particular industry sectors that would benefit from "segmentation"?
• what could ASX do to better meet the needs of start-up or exploration companies?
• what could ASX do to better meet the needs of WA-based companies (which form the bulk of metals, mining and energy listings, and outnumber NSW-based listed companies?)
• should ASX introduce separate listing requirements within a single market?
• should ASX introduce "new market" (possibly along the lines of LSE's AIM market or Hong Kong's GEM)?

Interestingly for listed mining and petroleum companies, ASX has flagged in the Concept Release that it will issue a discussion paper by mid-2011 on a review of the JORC COde and associated listing rules, and a consultation paper on hydrocarbon reporting requirements and standards. In the latter case, there is no direct equivalent to the JORC Code for hydrocarbon reporting, although the SPE guidelines serve as a benchmark.

Quite apart from the issued raised in the Concept Release, a number of the graphs are interesting and informative. In particular, the "Number of Companies by Market Capitalisation" graph on page 2 shows that around 1400 ASX listed companies have a market cap of less than $100 million and 500 less than $50 million. There were 126 IPOs in 2010, about souble 2009 and solidly above 2008, but down on every year from 2004 to 2007 (page 2 - Australian IPOs 1999 to 2010). Perth has 830 listings of which around 600 are metals, mining or energy (page 5 - Metals and Mining and Energy Industry Sector by State Capital City). There is also an interesting table on page 6 illustrating capital raisings by ASX listed companies (FY11 to mid-March 2011 number of subsequent issues by offer structure) showing the size of the raising versus the offer structure.

ASX is seeking feedback on the isues outlined in the Concept Release by 20 May 2011. JWS is planning to make a submission, so please contact us if you would like us to incorporate your comments or views in our submission.

Download the Concept Release here.