In February 2025, ASIC published a discussion paper on the evolving dynamics between Australia’s public and private capital markets to gather actionable ideas on regulation that could enhance the operation of these markets.
This month, ASIC released more than 50 public submissions that were provided in response to the paper and hosted a symposium that brought together industry leaders to discuss the future of the nation’s capital markets.
Holding Redlich provided a submission to ASIC and was invited to attend the symposium.
Two panel discussions took place at the symposium. Concurrently, ASIC announced a two-year trial of a fast-track process for initial public offerings of listed securities. A summary of the panel discussions, and of the fast track IPO trial, is provided below.
1. Panel discussion on public markets
- High-quality submissions and ‘actionable ideas’: About 90 submissions were received in response to the discussion paper, containing many high-quality ideas. This strong response demonstrates the considerable interest in the area from market participants.
- No immediate move to regulate: ASIC is in no rush to regulate. Chair, Joe Longo, stated that ASIC’s likely next steps are:
- during Q3 2025 – to release its views on how to strengthen public markets
- during Q4 2025 – to provide a roadmap for private markets.
- Attitudes to risk: Investment carries risk and the community needs to approach this with a pragmatic mindset. There are different schools of thought and perspectives on the retail/wholesale client distinction, including in relation to financial literacy. Notably, the Parliamentary Joint Committee on Corporations and Financial Services, in its February 2025 report which considered the question, did not make a recommendation to change the financial thresholds applicable to the wholesale client test.
- Cause of public market inactivity is not regulation: ASX experienced negative net listings in 2023-2024, but public market regulation did not materially change during that period. This suggests that public market inactivity is not caused by regulation. One alternative explanation is the increasing abundance of private capital provides companies with an alternative to public listing.
- Public market concentration is a challenge: The growth of index funds is contributing to substantial public markets concentration. For example, CBA leading the ASX causes additional capital to flow to CBA via index funds, which must hold CBA merely because it leads the ASX, not because those funds have undertaken bottom up analysis of CBA’s value.
- Compounding of concentration via super funds: Compounding the concentration of the ASX is that Australian superannuation funds comprise approximately 50% of the market. In conjunction with the annual performance test required under Your Future, Your Super, the result is a very significant part of the ASX tracks relatively conservative benchmarks chosen by each super fund, rather than aiming for outperformance or absolute return.
- Public markets not functioning as intended: The growth of index funds, the habit of super fund investors to track indices, and the short term mindset of many listed company boards is not the environment in which public markets were intended to function. There is a risk that public markets are not performing as a mechanism of allocating capital efficiently. This potentially stifles economic growth but also provides opportunities for investment innovation, for example, via equal weighted index funds (rather than market cap weighted index funds).
- Private markets have an important role to play: In view of the challenges inherent in public markets as noted, private markets have an important role to play for both wholesale and retail investors.
2. Panel discussion on private markets
- Diversification advantages: Private markets provide important diversification to investors (noting the concentration challenges inherent in current public markets).
- Private market de-risking: Private markets have changed substantially in the past 10 years. Previously, private markets were perceived as being more risky than public markets in view of the relatively high proportion of venture capital related assets that were held. Now, private markets provide exposure to assets across the risk spectrum including debt of all kinds including asset backed debt, infrastructure, real estate and private equity outside of venture capital.
- Valuation challenges: The basis of valuing a range of privately held assets, and the purpose for which / circumstances in which a valuation is obtained, needs to be clearer and standardised. Different investors can determine vastly different valuations of the same asset in the same circumstances. This is not ideal. For example, should real estate asset valuations be based on the last comparable traded price, or by reference to a financial model or discounted cash flow? Co-ownership or syndication of investments can help provide some third-party verification of value.
- Liquidity challenges: Prudential Standard SPS 530 Investment Governance requires superannuation funds to have a liquidity management plan that measures and manages liquidity on an ongoing basis. Retail investor funds in private markets that are registered managed investment schemes are required to apply a statutory test for liquidity that references ‘market value’, but need greater precision on what that means.
ASIC announces IPO ‘fast-track’ trial
On 10 June 2025, ASIC announced a two-year trial of an IPO fast-track process.
Under the current regime, shares in Australian companies must only be offered for issue to retail investors under a prospectus prepared in accordance with the Corporations Act 2001 (Cth), subject to limited exceptions. Shares must not be offered unless the required prospectus has been lodged with ASIC.
Applications for shares under the prospectus must not be accepted until the applicable ‘exposure period’ has expired. This period begins on the date the prospectus is lodged with ASIC and ends seven days later, though ASIC may extend this date to 14 days after the lodgement date.
Prospectuses lodged with ASIC are made public via the processes outlined in Regulatory Guide 254 Offering securities under a disclosure document. This includes the creation of a record of the prospectus in the ASIC OfferList. ASIC commences its review of a prospectus once it is lodged.
Under the trial, ASIC will:
- informally review prospectuses 14 days prior to public lodgement
- aim to complete its review of the prospectuses during the 14-day period prior to ‘formal’ lodgement
- generally avoid extending the seven-day exposure period to 14 days.
The above could shorten the IPO timetable by up to one week. Importantly, ASIC will take a ‘no-action’ position where applications for shares are accepted during the exposure period.
Other important conditions relating to the trial can be found here.
If you have any questions about the two panel discussions or ASIC’s fast-track IPO process, please contact our team below.
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.
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