The Australian Securities and Investments Commission (ASIC) has intensified its recent scrutiny of the private markets, raising concerns over transparency, investor protections and the potential for increased regulatory oversight[1].
Jamie Green, Executive Chairman of PrimaryMarkets, notes that the growing dominance of large superannuation funds, private equity firms, institutions and family offices in private markets, combined with a marked decline in new public listings and continued de-listings, has significantly reshaped the private capital market.
“In an increasingly concentrated superannuation sector, the sheer dollar value of funds deployed into private markets can fundamentally influence the broader Australian capital markets,” Green says. “ASIC has flagged concerns around leverage, valuation opacity and the impact on unit pricing-particularly when retail investors, via their superannuation funds, are exposed to these transactions.”
ASIC’s concerns over valuation transparency and processes have prompted calls for regulatory refinements, especially where potential conflicts of interest arise. The regulator is wary of scenarios where fee structures and management remuneration might incentivise inflated asset valuations. Financial intermediaries conducting valuations could also face heightened scrutiny, given the implications of periodic mark-to-market practices.
“At PrimaryMarkets, we welcome a well-regulated, well-structured private market ecosystem. Compliance and proper processes are not a burden- rather they present an opportunity to attract institutional capital and drive sustainable growth in the private market sector.”
Green adds that private market investments, while attractive, are not without risk. “Private investments share many characteristics with publicly listed companies, but they also carry unique risks- particularly around liquidity, pricing discovery and regulatory oversight,” he says.
The regulator has also turned its attention to the relationship between public and private markets, as it seeks to understand the sharp decline in IPOs. Compared to a thriving secondary capital-raising environment in public markets, fewer companies are opting for new listings, partly due to the availability of deep pools of private capital. Private equity firms and international investors have increased their participation in private transactions, further reducing the number of new public listings.
Traditionally, the ASX served as a launchpad for small-cap resource and niche technology companies. However, Green suggests that regulatory hurdles, compliance costs, and an increasingly difficult listing environment for microcaps have contributed to the decline in IPOs.
“The key reasons for a company to go public are capital raising and liquidity,” he notes. “But many micro-cap companies find themselves in a liquidity trap- trading with large bid-ask spreads and valuations at fractions of a cent. In these cases, raising capital becomes prohibitively dilutive for existing shareholders.”
Data underscores these challenges: out of approximately 2,230 listed companies, 275 trade at less than one cent per share, while 467 trade between one and five cents. Furthermore, 253 companies have a market cap below A$5 million, and 269 fall between A$5 million and A$10 million.
“Given these realities, voluntary de-listings of microcaps are unsurprising,” he notes.
“With the rise of secondary share trading, the need for market integrity, governance, security and transparency is more critical than ever,” Green says. “Platforms like PrimaryMarkets, which operate with robust compliance frameworks, will continue to play a crucial role in ensuring fair and secure private share transactions.”
———
You must be logged in to post or view comments.