UPDATE: The Australian Securities Exchange (ASX) is facing urgent calls for a comprehensive overhaul of its listing rules, as investors express growing concerns over potential abuses. Led by CEO Helen Lofthouse, the ASX must act decisively to protect shareholder interests amid increasing scrutiny of corporate transactions.
With a series of controversial deals in recent years, including the $2.57 billion acquisition by Sandfire Resources during the COVID-19 pandemic, investors are demanding more stringent regulations. These transactions often skirt existing rules or exploit questionable waivers, putting shareholder rights at risk.
DEVELOPING: The ASX’s last major examination of these rules occurred in 2017, spurred by investor backlash against James Hardie‘s acquisition of Azek. The current review process, anticipated to culminate in a consultation paper by November 2025, aims to recalibrate the balance of power in favor of investors rather than corporate boards.
Investor sentiment is shifting rapidly. Many fund managers are advocating for a new requirement mandating shareholder approval any time a bidder issues more than 25% of existing capital for acquisitions. Such a move would align with practices in major markets like Canada, Hong Kong, and New York.
As the ASX prepares to unveil its new consultation paper, the stakes are high. The proposed amendments could redefine how major mergers and acquisitions are handled, ensuring that shareholders have a voice in significant corporate actions.
IMPACT: Failure to implement timely changes could lead to further erosion of investor confidence, risking the integrity of Australia’s financial markets. The ASX must prioritize these reforms to prevent a continuation of the status quo, which many see as favoring companies over investors.
In the past four years alone, numerous transactions have raised red flags—often raising more capital than companies’ market capitalization. The backlash against these practices emphasizes the need for immediate reform. During the last review, the ASX found that requiring shareholder approval for significant transactions would have captured up to 70% of scrip-based bids. However, the ASX deemed it too burdensome for companies.
Investor protections are crucial, especially given the historical challenges faced by ASX boards in managing large-scale mergers. The call for change is gaining momentum, with numerous submissions expected once the ASX’s paper is released.
NEXT STEPS: The ASX is set to hold further consultations and gather submissions following the release of the consultation paper. The Australian Securities and Investments Commission is also monitoring the process closely. As investors rally for more transparency and accountability, the ASX cannot afford to delay these critical reforms.
In conclusion, the urgency for updated listing rules cannot be overstated. The future of investor confidence in the ASX hinges on swift and decisive action to ensure that shareholder rights are upheld and the integrity of the exchange is maintained.
