Technology company IPOs: ASIC regulation of corporate finance

ASIC has released Report 489 arising from its regulation and oversight of fundraising, mergers and acquisitions transactions, corporate governance, and other general corporate finance areas for the period from 1 January to 30 June 2016.

REP 489 sets out ASIC’s observations and concerns arising from its Corporations team’s review of prospectuses and other disclosure documents for offers of securities lodged with ASIC under Ch 6D of the Corporations Act during the relevant period.

Disclosure deficiencies

ASIC observed a large number of IPO prospectuses for technology companies and has identified some common disclosure deficiencies in offer documents:

  • insufficient disclosure about the business model and revenue generation
  • inadequate explanation of true competitors due to a narrow definition of the market and failing to acknowledge international online and physical ‘bricks and mortar’ competitors
  • for start-up technology companies, insufficient prominence of limited operating history
  • inadequate disclosure about intellectual property rights such as type, how integral it is and whether third-party rights may be infringed
  • irrelevant data such as worldwide internet use and wi-fi access speeds.

The observations in REP 489 are a useful barometer in identifying ASIC’s regulatory policy approach for new listings in this sector and when it is likely to intervene in a transaction.

Download REP 489

For more information on ASIC’s regulatory approach in the corporate finance sector and assistance with associated legal and compliance obligations, contact Meridian Lawyers Principal Michael Bracken.

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