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Category: Business, Economics and Finance / Markets / Stockmarket

Small investors still locked out of lucrative ASX floats

Wednesday, 2 Nov 2016 16:45:10 | Elysse Morgan

Retail investors are bitterly disappointed the ASX has ignored their campaign to get greater access to stock market listings. (AAP: Mick Tsikas)

Retail investors are bitterly disappointed the ASX has ignored their campaign to get greater access to stock market listings.

Many initial public offerings, or IPO's, this year have been lucrative, outperforming the ASX 200 by around 25 per cent.

DroneShield which listed in June jumped 90 per cent on debut from its offer price of 20 cents, and BuyMyPlace jumped on its first day in March and eight months on is double where it started, now trading at 48 cents.

They are tidy profits for investors who could get in early — but the best IPOs are often only open to the big end of town.

"They are pre-sold to sophisticated investors and institutions, a sophisticated investor is someone with $2.5 million in assets," aid Ben Bucknell from OnMarket Bookbuild, an online company which helps small retail investors access IPOs.

"In all the bigger IPOs they're pre-sold so there's no shares left for retail investors."

Midway through the year Mr Bucknell said small investors and the Australian Shareholders Association saw an opportunity to even up the playing field when the ASX launched a review of its listing rules.

A campaign was launched by OnMarket calling on the ASX to mandate a minimum number of shares in every float be made available to retail investors, like mum and dad investors and retirees.

The idea was lifted from Hong Kong and Singapore's markets, which have minimums of 25 and 40 per cent.

Today the ASX said it will not go down that path, saying "the market impacts of such a change have not been examined and are not well understood, and would likely tend to promote some business interests over other stakeholders". A claim Mr Bucknell rejects.

"To say it's not well understood I don't get that because there are two markets there that have these very rules in place, and have done for a very long period of time," he said.

The ASX's original proposal to slash the minimum number of investors from 300 to 100 on larger floats was another point of contention and one that it has rolled back.

A minimum number of 300 investors remains, but as Diana D'Ambra from Australian Shareholders Association explained previously, that is still stacked against small investors.

"It will be quite easy for the investment bank to satisfy that and after that what's their incentive or compelling argument then to put more shares out to retailers I would think it's a lot more work and admin and therefore its probably easier for them to fill the float themselves," she told the ABC's The Business.

The ASX said it was encouraging more people to become involved in floats by introducing a minimum of 20 per cent of shares be what is called "free float", but that will not help small investors either.

Free float is an allocation of shares to someone who is not a related party of the company, so that could be a high net worth, or an institutional investor.

"I think there will be a lot of very disappointed retail investors coming out of this. I think it continues the exclusion of retail investors from the IPO market," Mr Bucknell said.

The ASX launched a review of its listing rules in the middle of the year when it found itself at the centre of a huge row over the float of a dodgy music streaming app called Guvera.

The ASX controversially blocked the company from listing at the last minute, after concerns were raised about its lack of revenue, huge debts and possible untruths in its prospectus.

The ASX's new rules released today to raise the bar for companies who want to debut on the market was broadly welcomed by small and large investors.

AustraliaPlus


 

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