In Perth another door opens

Everyone knows you can’t keep the Perth market down for long. If things are going bad they just open a new door for gullible investors and get on with business.

Not many share market watchers appreciate that Perth plays host to more public companies than any other part of the Australian Stock Exchange and while many are in the speculative mining end of the market that doesn’t mean they will be riding off in the sunset any time soon just because the mining industry is in the dumpster.

No they just turn themselves into high tech start-ups, internet app builders, biotechs, or potential global protein providers. Many want to use their Perth listing as a stepping-stone to establishing themselves in the US market with NASDAQ in their sights.

Now there’s nothing wrong with all this. Backdooring a company into a listed entity is not a bad thing. It saves the young start-up a hell of a lot of money and paperwork  by circumventing the initial public offering regulatory scrutiny.

And that what’s got the ASIC worried. As reported in the AFR, Commissioner John Price shared his concerns about resources companies suddenly re-inventing themselves as technology companies earlier this week. And its not the first time ASIC has rung the warning bell.

Price was in Perth and zeroed in on companies coming through the backdoor for a public listing without adequate market disclosure. His warning comes amid upheaval in the resources sector as subdued commodity prices spill over into former speculative mining stocks and restrict the sector’s ability to raise money, explore, and mine.

He pointed out that last year saw a boom in backdoor listing – there were 31 reverse listings overall. Sixteen were tech companies, the highest number since the dotcom boom of 2000, and there’s more to come.

Mr Price was worried that investors might bedazzled by the potential of high tech companies to change the world and make a lot of money, but the key questions the market needed to be aware of included: “What’s the new business model . . . and how is it going to make money?”

He said the regulator was particularly focused on backdoor listings that weren’t accompanied by adequate financial and risk disclosure. Individual investors, and the professionals for that matter, had to be adequately assured about what they were buying into, or converting their investment into, before they could make a decision based a hard facts.

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