3 recommendations to create big change on the ASX.

A decline in the number of listings.

Robert Gottliebsen is a stalwart of the Australian business journalism scene having been a consistent commentator for decades.

Last year, he led a push against the changes to the sophisticated investor test and helped to quash the interest in changes to that scheme, which I was happy to contribute to.

Imagine how hard it would be to raise capital if only 10% of sophisticated investors were allowed to bid? Bye-bye placements... bye-bye!

So this year, he asked me to put forward my thoughts on the ASX in light of ASIC's report on the decline in the number of listings. I was keen to lean in.

Understanding ASIC's review of the ASX.

The net summary from the report isn't going to be a surprise to you.

The number of new IPO's is at a low point. There many delistings due to take-overs and deaths. But secondary capital raises on the ASX (placements and shareholder offers) are resilient and strong.

Being asked for comments on these items can be tricky for me.

The ASX is truly competitive on a global scale, especially for investor engagement and they are a key partner for us as well. I also know many hardworking people there who are driving for a better, more engaging and growing market.

With that said, I think there are three key areas that ASIC and the ASX can improve on to increase the number of listings and the amount of activity.

1. Tax benefits akin to the private sector.

Investing in private, early-stage tech companies directly results in an immediate tax benefit and the potential of tax free gains.

Similarly, investing in an Australian VC has similar benefits. And superannuation has long-lasting, compounding benefits. 

But early-stage, listed companies? Nothing.

Introducing a tax benefit for investors to support early-stage listed companies (perhaps limited to new capital raises and IPO's) would supercharge investment and encourage action.

2. Allow retail to invest in placements.

Listed companies are unique from a disclosure requirement. 

Restrictions on retail investment in unlisted companies, credit schemes, and more, are unsuitable in the listed space given the need for continuous disclosure. 

Allowing retail investors the ability to invest in placements (perhaps limited to $30k) will even the playing field for retail investors, generate more demand for listed raises, and speed up the capital cycle.

Win, win, win!

3. Support reverse listings.

Reverse listings, also known as back-door listings, have generated great returns for investors over time. 

ZIP and Afterpay are two examples of mining shells turned tech businesses that have made great returns for those early investors. It also means a smoother, faster path to listing without lowering the requirements to be an ASX listed company.

With these changes...

We would see (1) less companies delisting, (2) more investor activity, and (3) more investment in early-stage listed companies.

This will have short and long-term impacts as the listed market continues to gain momentum as a venue to list, raise and grow!

What else could the market do in order to drive listings and drive growth?

Have a good weekend.

Ben