ASX has guardrails in place to make sure companies planning to list are not absoulte lemons. Picture Getty
IPO Wrap: The 2 IPO tests the ASX uses to screen potential lemons; and upcoming listings on the ASX
IPO Watch
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- ASX has guardrails in place to make sure quality companies are listing
- We take a look at ASX’s Profit Test and Asset Test
- We also look at the upcoming IPO listings on the ASX
No investment is free of risk.
While investing in an IPO stock can boost your portfolio, it could also cause some volatility especially in the early trading days.
For example, Facebook (now called Meta) went public at a price of US$38 in 2012. Its price dropped to US$17.58 in the same year, before surging to its record level of US$381 right now.
In Australia, the ASX has obviously put some guardrails to protect investors from unwittingly putting their money into an absolute lemon.
The ASX has discretion to accept or reject any application for admission to its official list, and takes into account, among other things, the company’s reputation.
The market operator also ensures that companies planning to list on the ASX bourse meet either its Profit Test or Asset Test.
The ASX Profit Test
In the profit test, the company must be a going concern, and must have operated in the same predominant business activity for at least the last three full financial years.
The company must also show three full years of aggregate profit of at least $1 million.
In the year prior to listing, the company must have consolidated operating profit from continuing operations of at least $500,000.
The ASX Asset Test
If the company fails the Profit Test, it can still list on the ASX if it meets the Asset Test.
The asset test requires that the company has net tangible assets of at least $4 million (after deducting the costs of fundraising), or a market cap of at least $15 million.
In addition, the company’s working capital, as shown in its reviewed pro forma statement, must be at least $1.5 million.
Reporting obligations
After listing, all companies have periodic financial reporting obligations, which include:
- A half-year financial statement
- Directors report and Appendix 4D
- A preliminary final report (an Appendix 4E), and
- An annual report.
And now…
Here’s how the 2024 ASX IPOs performed
| Code | Name | IPO Price | Current Price | Return | Market cap | Listing date |
|---|---|---|---|---|---|---|
| KM1 | Kali Metals | 0.25 | 0.54 | 116% | $98,591,981 | 8/1/2024 |
| I88 | Infini Resources | 0.20 | 0.27 | 35% | $9,560,000 | 15/1/2024 |
There has been two ASX listings in 2024 – Kali Metals (ASX:KM1) and Infini Resources (ASX:I88).
Kali is backed by none other than MinRes boss Chris Ellison, among other deep-pocketed notables, and its share price has doubled since debut.
The company is a Kalamazoo Resources (ASX:KZR) spinout, with assets in WA (Pilbara and Goldfields tenements), and in the Lachlan Fold Belt of southern NSW and northeastern Victoria.
The company recently said that spodumene has been identified at Spargoville, part of its Higginsville lithium district in WA.
Initial assays from rock chip samples at the Mt Henry Project also returned a lithium result of 1.02% Li20, <10 ppm Ta in one sample.
Infini meanwhile debuted last Monday, and is up over 35% since.
The company has a portfolio of eight projects, covering uranium and lithium in a mix of brownfield and greenfield assets in Canada and Western Australia.
Read more: TEN BAGGER: Why fundies are looking off the ASX for the next big thing
Upcoming ASX IPO listings
All dates are sourced from the ASX website. They could change without notice.
Capstone Copper (ASX:CSC)
Expected listing: February 2
IPO: Non-IPO, a CDI listing
Capstone Copper is a copper producer operating in the Americas.
The company’s 100% owned Pinto Valley copper project is an open-pit located at the west end of the historic Globe-Miami mining district of central Arizona, one of the oldest and most productive districts in the US.
Several mines and numerous prospects have been developed in the area. Larger mines in the district are porphyry copper deposits associated with Paleocene granodiorite to Granite Porphyry stocks.
In Mexico, Capstone owns 100% of Cozamin, a copper-silver underground mine with a surface milling facility, located 3.6km north-northwest of Zacatecas City in the mineral-rich state of Zacatecas.
Since the first full year of operation in 2007, Cozamin has generated free cash flow at all points of the copper price cycle.
And in Chile, Capstone’s 100% owned Mantos Blancos is an open-pit mine located in the Antofagasta region, within a one-hour drive of port facilities at Antofagasta and Mejillones.
That operation currently mines and processes both sulphide and oxide ores.
Fuse Minerals (ASX:FSE)
Expected listing: February 8
IPO: $10m at 20c a share
Fuse has three ongoing minerals exploration projects – Mt Sydney and Mt Sandman in WA, and Eastern Isaac in Queensland.
The flagship Mt Sydney Project covers a strategic landholding (100%-ownership) of 1119km2, and is located on the under-explored Pilbara Craton-Paterson Province margin in WA.
Fuse’s work on the Mt Sydney Project to date shows VHMS gossans, high-grade polymetallic vein outcrops, mineralised breccia, and magmatic copper-nickel drill targets across this very large area of tenure.
The project has limited past exploration, with only 1106m of drilling over 484km2.
The Mt Sandman Project is situated on the complex boundary of two major tectonic units of WA – the Proterozoic Gascoyne Province and the Palaeozoic Carnarvon Basin.
Rock chipping has confirmed base metal association with barite and carbonate rocks up to 6g/t Ag >1% Pb & 0.3% Zn.
The Eastern Isaac Project in Qld meanwhile is a 25% ownership project, with option to earn up to 80%.
The Project comprises three copper/gold project areas totalling 637km2: Gotthardt of 93km2, Valkyrie of 254km2, and Hamilton Park of 290km2.
Golden Globe Resources (ASX:GGR)
Expected listing: February 19
IPO: $6m at 20c a share
The gold explorer has projects in Queensland, WA and NSW.
In the last four years, the company says it has acquired four projects with high prospectivity including Dooloo Creek and Alma in Queensland, Crossways in Western Australia, and Neila Creek in NSW.
GGR says each of these projects offers substantial opportunities for gold resources, including high-grade copper.
The explorer has also conducted extensive drilling and sampling at Dooloo Creek, yielding impressive results over the past two years.
There are plans for further drilling across all GGR projects, with an immediate focus on Neila Creek and ongoing efforts at Dooloo Creek.
K S Capital is lead manager of the float.
Read MoreInitial Public Offering - IPO
