The Australian Securities Exchange (ASX) has again cautioned entities on announcements which seek to ‘ramp up’ the price of securities rather than to inform the market. Ramping announcements have been on ASX’s radar for some time now and this latest reiteration in updated Guidance Note 8: Continuous Disclosure: Listing Rules 3.1 – 3.1B (GN 8) shows that ASX will not hesitate to suspend an entity when a ramping announcement is suspected and will require the entity to:

• identify what information in the announcement was price sensitive and why;
• the purpose of the announcement if it is not marked as price sensitive and therefore not required to be disclosed under ASX Listing Rule 3.1; and
• if the announcement includes a revenue projection or other forward-looking statement, to identify the reasonable grounds on which the statement was made and any material assumptions or qualifications underpinning the statement.  

In addition, if the announcement relates to a contract, ASX may request a copy of the contract and may require the entity to publish a corrective announcement confirming that the information in the ramping announcement was not material, or was incomplete or misleading, and that investors should not make investment decisions based on the announcement.
 
Ramping announcements can take many forms, but ASX is particularly concerned about announcements in relation to material contracts or transactions that do not disclose key information investors and their professional advisers reasonably need to understand the materiality of the contract or transaction and to assess its impact on the price or value of the entity’s securities. Entities will need to be particularly careful in relation to contracts to ensure that the announcement:

• complies with the criteria set out in section 4.15 of GN 8 including naming counterparties properly and explaining the nature of the contract and significance to the entity;
• clearly outlines the status of the agreement – whether it be a non-binding heads of agreement, framework or initial contract only;
• does not contain superlative and exuberant language on the “material” nature of the contract when plainly it is not; and
• includes updated information where a previously announced material customer contract has not proceeded or has been terminated.

Whilst listed entities often have a range of legitimate reasons for making announcements and it is not always clear whether the information is price sensitive, we recommend that listed entities give careful thought to the timing and proximity of announcements, the language used and the substance of the announcement.  Clients are encouraged to contact us in our Perth office or our Melbourne office for further advice to ensure compliance by clicking here.