In 2016 the Australian Securities Exchange (ASX) exercised its discretion to block the initial public offering (IPO) of music streamer Guvera Limited (Guvera), which sought to raise up to $100 million. 

At the time, ASX declined to publicly disclose details of the reasons for its refusal.  However, it has since been reported that documents prepared after Guvera was put into administration cite the following reasons for ASX’s refusal:

• that Guvera’s auditors had highlighted questions about whether it could continue as a going concern;
• Guvera’s historical financial losses and high cash burn rate;
• the significant debt that would remain outstanding if the minimum subscription of $40 million was raised (some of which was in default with no formal arrangements in place to defer payment); and
• Guvera’s governance, including the nature and materiality of past and ongoing related party transactions.

In addition to refusing the Guvera application, the ASX has rejected more than 80 listing applications since 2016.  This serves as a reminder that ASX has absolute discretion to refuse admission of a company under ASX Listing Rule 1.19 and it is not required to provide reasons for its decision.  To avoid costs and effort prior to a formal listing application, ASX has in place an in-principle advice regime whereby companies can submit details on a prescribed form for ASX to assess the company’s suitability for admission. Whilst ASX’s positive advice following such an application does not guarantee the company’s admission (as it will still need to meet admission criteria), it will give the company some degree of certainty prior to undergoing the expense of the listing process. 

This also highlights the importance of including fulsome disclosure during the in-principle advice process, given that ASX will undertake a second review of a company’s suitability for listing once it has lodged its prospectus and made a formal application for listing.