Australian Securities and Investment Commission

Question: Discuss about the Australian Securities and Investment Commission. Answer: Introduction: A prospectus is a formal document which is required and filled with the Australian securities and investment commission (ASIC). A prospectus has to be prepared by the company under which management status, background, financial aspects about the company would be provided so to enable the shareholder to take decision about whether to invest in the company or not. It is the requirement that prospectus must be lodged with both the ASX and Australian securities and investments commission (ASIC) . Australian securities exchange ltd (ASX ltd) is an Australian public company which operates primary stock exchange, the ASIC (also referred as Sydney stock exchange). A company has to follow a lawful process before its IPO. Firstly, the prospectus must comply with all the requirements of corporation act 2001. Secondly, it does not contain a deceptive statement, misleading, false or omit any material information. All this needs to be complied once lodged with ASIC. A due diligence committee (DDC) has been established to ensure the above requirements. The corporations act does not lay down all the matters that should be included in the prospectus. However matters to be included relating to company are liabilities and assets, financial condition, profit and loss, payments made to directors and advisors, the rights attaching to the securities,and terms and conditions of the offer. ASX provides a place where companies are able to raise capital and provide its shareholders a market over which they can trade freely (Kendalls, 2009). Trading companies (except foreign company) have to comply with the following listing requirements of ASX: There should be 500 holders having an amount of $2000 at least of the main securities, or 400 holders having $2000 at least of the main securities; here 25% can be hold by non related parties. The entity should have applied or has the permission for citing all the securities in main class of securities. The company must have been qualified either the profit test or the net tangible asset test if applicable. The issue price of the securities to be traded must be of minimum 20 cents in cash, and compliances of chapter 6 of ASXLR, which is securities obligations and rights. The ASX code of Kogan.com ltd is KGN, and its industry group as per GISC Industry group is retailing industry group. The current issue price of kogan.com on 23December, 2016 is 1.40 AUD (Australian dollar). The kogan.Com reveals in its prospectus that by 2017 financial year, its EBITDA (earnings before interest, tax, depreciation and amortization) has been forecasted as $6.9million. Currently kogan director Ruslan Kogan has no intention to pay dividend, rather his team is more interested in investing the earning in the company. The offer comprises of the priority offer, the broker firm offer, the institutional offer, the employee offer. There is no provision for general public and retail investors for trading shares. As per looking at the current scenario kogan.com as a retail industry is fastest growing company is Australia, hence as an investor it is a good decision to invest in the company. By this, the investor or shareholder can predict that there would be a good source of income generated to the shareholders in the form of dividend. Hence it can be expected in future that the company would one of the fastest retail industry, therefore it is a good decision to invest in the shares of the company. As per corporation act and ASX listing rules, it is the requirement for the company to pay dividend (interim, final, and bonus) as it is appropriate to the directors. And company should also fix the date, time and method of paying dividend. But while comparing this with current scenario the company is not fulfilling the basic requirement of paying dividend. In prospectus it was expected that the revenues, EBIDTA and net profit would be 4241.2 million, $6.9 million, and $0.8 million respectively and kogan.com would be selling 28 million shares approximately at a price of $1.80 each. Hence by comparing this with the current scenario it can be presumed that the share price is quite expensive. References: DLA1284, A guide to listing in Australia, accessed on 24 December, 2016, viewed on https://www.asx.com.au/documents/professionals/DLA1284_-_A_Guide_to_Listing_in_Australia.pdf ASX Limited, Listing requirements, accessed on 24 December,2016, viewed at https://www.asx.com.au/listings/listing-capital-raising/listing-requirements.htm ASX listing rules, Chapter 6, securities, accessed on 24December,2016, Viewed at https://www.asx.com.au/documents/rules/Chapter06.pdf Kendalls,B,.2009,Australian master accountants guide, McPhersons printing group, Australia Nolan,J,.1995,Australia business: the portable encyclopedia for doing business with Australia, World trade press, USA ASX Ltd, 2016, The Official list (listed companies), accessed at 24 December,2016, Viewed at https://www.asx.com.au/asx/research/listedCompanies.do?coName=K Powell,D,. 2016, accessed on 23 December, 2016, Viewed at https://www.startupsmart.com.au/advice/funding/five-takeaways-from-kogans-ipo-plans/