ASIC Report on corporate finance regulation January to June 2016

ASIC today released a report on its regulation of corporate fundraising activities. (VIEW LINK) While offering brief comments in relation to the Guvera IPO, the report's observations about technology company IPO prospectuses are worth noting: insufficient disclosure of the business model - aka how revenue will be generated; inadequate explanation of the true competitors by defining the competitive market very narrowly; for start-up tech companies - insufficient prominent disclosure of the limited operating history of the company; inadequate disclosure around IP rights. In terms of the 235 original disclosure documents lodged during this period (IPOs plus other capital raisings), ASIC raised disclosure concerns in almost 32% of the documents lodged and 85% of these documents were subsequently changed. ASIC noted with concern the use of non-IFRS revenue measures such as total transaction value or TTV in the overview, rather than the typically much smaller actual revenue the company will make. Bids and schemes raised different concerns (in order from most to least common): inappropriate/inaccurate disclosure (over 55%), structural concerns (24%); content of independent expert reports (over 20%); substantial shareholder notices (10%).