For a long time now the Australian Securities Exchange (ASX) has had a very active market in backdoor listings. A back door listing is effectively a way for a private business or company to obtain a listing via a vend-in of a business or company to a pre-existing ASX – listed “shell” company, and is an alternative to undertaking a conventional initial public offering (IPO).
Traditionally backdoor listings have been most popular within the resources sector. However, the significant headwinds faced by the resources sector in the last few years, in terms of volatility in earnings and constraints on the availability of capital, saw the appetite of speculative investors shift towards technology, industrial and other start-up companies. This shift in investment appetite, combined with the increasing number of listed “shells” – often defunct mining companies – and budding technology companies seeking efficient means to access capital has increased the appetite for backdoor listings in alternative sectors.
The ASX, eager to ensure that market integrity is preserved and the standard of listed companies maintained, has reformed a number of its listing rules relating to new admission and, at the same time, tightened the rules relating to backdoor listings to achieve greater alignment with IPOs. While these reforms have raised the threshold for new listings, they do not appear to have stymied interest in listing on the ASX, whether by IPO or backdoor listings.