Companies may find it easier to join the ASX if these rule changes go ahead

Source: The Conversation (Au and NZ)

Something strange has been happening in many financial markets around the world: the number of companies listed on public stock exchanges has been steadily declining.

Some have been taken over by private companies. Others are deciding to remain private rather than list on a stock exchange. At the same time, private markets – where investors back private companies that are not listed on a stock exchange – have been expanding.

Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC), is worried about this trend.

Public markets are the main way everyday investors can make investments. They’re open to everyone and are far more transparent than private markets, making them easier to supervise and regulate.

ASIC has raised concerns that strict rules against advertising an initial public offering before a prospectus has been released may be making it too hard for companies to gauge market interest.

On Tuesday, ASIC announced a proposal to change the rules, which would allow companies to advertise their share offers before they issue a prospectus – under some tight constraints.

This could make public markets easier to access and more attractive for companies looking to raise funds. But it wouldn’t be without risks.

Reaching the public

The traditional way for a company to raise funds from the public has been to undertake an initial public offering (IPO): offering shares in the company to raise funds via listing on a public exchange.

ASIC reports that in 2024, there were 1,989 companies listed on the ASX, down from 2,073 listed companies in 2014.

Listing on a public exchange allows investors to easily buy and sell shares, making the shares “liquid”. This is considered good for the investors, for the company trying to raise funds, and for the economy in general, as people have an important avenue to support business growth.

To make the IPO process work, a number of important rules exist to protect investors, particularly inexperienced ones. These rules help ensure investors don’t fall prey to misinformation about a company when deciding to invest.

They ensure a certain level of trust in the system, and therefore also encourage investment. However, these rules also make IPOs expensive and complex.

Guardrails? Or roadblocks?

Currently, companies are not allowed to advertise an offer of shares before they have formally lodged their IPO “prospectus”.

A prospectus is a legal document that provides factual information about the investment.

While this restriction on early advertisement helps protect investors, it also adds to the difficulty of undertaking an IPO.

Under the proposed new rules, companies would be allowed to advertise their offers of shares earlier, as long as they:

• identify the issuer and the seller of the shares
• ensure a prospectus is made available by the time the shares are listed
• make it clear where and when a prospectus will be made available
• and direct investors to the disclosure document as the key source of information.

In ASIC’s view, allowing companies to advertise upcoming IPOs will help them to gauge market interest earlier, which will hopefully lead to more successful IPOs.

The risks

Relaxing the advertising restrictions comes with risks. Even though investors will be directed to the disclosure document, they may be influenced by advertising to make an investment they might not otherwise have made.

Overseas countries generally restrict advertisements in various ways for this reason.

ASIC’s proposal would bring Australia broadly in line with the United Kingdom and New Zealand.

But it would be more permissive than the United States, which generally does not allow pre-IPO advertising to retail investors (only to large institutional investors, such as pension funds).

Although the new rules will be consistent with Australia’s advertising rules for “crowd-sourced equity funding” (a method of capital raising for small private and public companies), public markets are considerably larger and more significant, and the risks are therefore greater.

Levelling the playing field

This proposal is one of ASIC’s efforts to make public markets more attractive for companies. In a similar vein, ASIC announced a two-year trial of a fast-tracked IPO listing process in 2025.

This focus is important. Public markets help set a standard for ethical and transparent companies. They create a positive and liquid investment climate so investors can feel confident making and selling investments. They also allow ASIC to perform its regulatory role effectively.

Changing the advertising rules for IPOs may help to level the playing field between private and public companies, and bolster Australia’s public markets for the future.

However, the details of the design will matter. It’s important that the proposed rules continue to protect inexperienced investors.

In 2025, Tamara Wilkinson and Steve Kourabas made a submission to ASIC’s Evolving Capital Markets Discussion Paper, which is available publicly on the ASIC website.

Original source: https://analysis1.mil-osi.com/2026/08/04/companies-may-find-it-easier-to-join-the-asx-if-these-rule-changes-go-ahead/