Ann: Initial Director's Interest Notice x 2, page-27

every "backdoor" listing will be affected if they are changing the nature of their business (eg. from oil to IT), even if they are cashed up. it just means they go into suspension & might have to do a small capital raising

regards


From: Matthew Gibbs
Sent: Friday, May 13, 2016 12:09 PM
Subject: RE: CONSULTATION PAPER 12 MAY 2016 - FOLLOW UP 2

Hi DX. Here are answers from ASX’s Chief Compliance Officer.

Regards,

Matt

To add. The paper states:

“All entities admitted under the assets test are currently required to have at least $1.5 million in working capital, after taking into account any budgeted revenue for the first full financial year after listing. For mining and oil and gas exploration entities, this $1.5 million in working capital must be available after allowing for the first full financial year’s budgeted administration costs, and the costs of acquiring plant, equipment and/or tenements.”

My question is: For all entities admitted under the $20M market capitalisation test, is there a minimum capital raising requirement, such as the current $2 million?

NO, THE ASSETS TESTS HAS TWO ALTERNATIVE LIMBS – NTA OF $5M OR MARKET CAP OF $20M. IN EITHER CASE, THE ENTITY MUST HAVE AT LEAST $1.5M OF WORKING CAPITAL.

1. The majority of backdoor listings would probably go ahead due to a capital raising meeting the $5M net assets test or $20M market capitalisation test. SOME SMALLER ONES WOULD BE BLOCKED, BUT THE LARGER ONES ARE NOT AFFECTED BY THE INCREASE IN THESHOLDS.

1. However, as soon as the intention for a backdoor listing is announced, the company will be suspended from trading (until it fulfils relisting requirements, such as prospectus). In other words, there will be no trading in the company shares from the time of the announcement of an ‘acquisition’ until there is relisting. CORRECT.

1. In general, such suspensions may reduce the incentive for backdoor listings because an IPO may be more attractive. NO. IT PUTS BACKDOOR LISTINGS ON THE SAME FOOTING AS FRONT DOOR LISTINGS, WHICH CAN’T TRADE UNTIL THEY MEET ASX’S ADMISSION AND QUOTATION REQUIREMENTS.

1. However, ASX shells that are cashed-up may retain their attractiveness due to no need for a capital raising. However, they still will be suspended. THERE ARE NOT MANY “SHELLS” THAT ARE SUFFICIENTLY CASHED UP TO AVOID DOING A CAPITAL RAISING. EVEN WHERE THEY DON’T NEED TO RAISE CASH, THEY WILL USUALLY HAVE TO DO A SMALL CAPTIAL RAISING, AS ONE OF THE REQUIREMENTS FOR LISTING IS A PROSPECTUS (UNLESS WE ALLOW AN INFORMATION MEMORANDUM IN LIEU OF A PROSPECTUS, WHICH IS NOT COMMON).

1. That said, the ASX will scrutinise each backdoor listing, in the event they may wish to exercise their discretion to prohibit it. CORRECT.

Sent: Friday, 13 May 2016 8:01 AM
To: Matthew Gibbs <[email protected]>; Kevin Lewis <[email protected]>
Subject: Re: CONSULTATION PAPER 12 MAY 2016 - FOLLOW UP 2

To add. The paper states:

“All entities admitted under the assets test are currently required to have at least $1.5 million in working capital, after taking into account any budgeted revenue for the first full financial year after listing. For mining and oil and gas exploration entities, this $1.5 million in working capital must be available after allowing for the first full financial year’s budgeted administration costs, and the costs of acquiring plant, equipment and/or tenements.”

My question is: For all entities admitted under the $20M market capitalisation test, is there a minimum capital raising requirement, such as the current $2 million?

Thank you


D
X





Sent: Friday, May 13, 2016 7:35 AM
To: Matthew Gibbs ; [email protected]
Subject: Re: CONSULTATION PAPER 12 MAY 2016 - FOLLOW UP

Thank you Matthew

So to summarise:

1. The majority of backdoor listings would probably go ahead due to a capital raising meeting the $5M net assets test or $20M market capitalisation test.

1. However, as soon as the intention for a backdoor listing is announced, the company will be suspended from trading (until it fulfils relisting requirements, such as prospectus). In other words, there will be no trading in the company shares from the time of the announcement of an ‘acquisition’ until there is relisting.

1. In general, such suspensions may reduce the incentive for backdoor listings because an IPO may be more attractive.

1. However, ASX shells that are cashed-up may retain their attractiveness due to no need for a capital raising. However, they still will be suspended.

1. That said, the ASX will scrutinise each backdoor listing, in the event they may wish to exercise their discretion to prohibit it.

Are all of the above correct?

Thank you

Kind regards


D
X


From: Matthew Gibbs
Sent: Thursday, May 12, 2016 5:17 PM

Subject: RE: CONSULTATION PAPER 12 MAY 2016

Hi DX. We’re happy to clarify.

1. No – we look at the combined company.

1. No – it is relevant but unusual. Most backdoor transactions involve raising cash.

1. No – it would still have the opportunity to satisfy the admission tests. It’s worth noting that ASX does not list ‘cash boxes’. Unrelated to this consultation, companies with a high proportion of cash must comply with a ‘commitments’ test about how they intend to use the funds.

Regards,

Matt


Matthew Gibbs | General Manager, Media and Communications
ASX Group | 20 Bridge Street | Sydney NSW 2000
T: +61 2 9227 0218 | M: 0411 121219 | E: [email protected]
www.asx.com.au
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Sent: Thursday, 12 May 2016 3:44 PM
To: Matthew Gibbs <[email protected]>; Diane Lewis <[email protected]>
Subject: CONSULTATION PAPER 12 MAY 2016

Dear Matthew & Diane

I spoke to Matthew earlier today. I have now read the whole paper.

Just for my clarity a very basic question:

1. In respect to back-door listings, the “requirements” listed in the paper obviously only apply to the entity being vended into the pre-existing ASX company. Is this correct?

1. In other words, if an ASX shell company has $10 million in net cash (net assets), this has no relevance in relation to the requirements? Is this correct?

1. For example, an ASX shell has $10M in net cash and a vendor company has no history of profit and no net assets. Therefore, the vendor cannot do a backdoor listing or reverse takeover. Is this correct?

Thank you