Sliding doors: Comparing backdoor listing and frontdoor listing for Australian start-ups

With diminishing prices over this decade in the minerals sector, for example iron ore, many junior' listed minerals companies have become attractive 'hanging space' for entrepreneurs in a variety of other businesses, to achieve listing through a shell company. Colloquially known as backdoor listing, this practice has occurred in Australia for decades. Evidence shows that since 1994, backdoor listings account for around 10-15 per cent of new listed firms. Generally promoted as a legitimately viable alternative due to less regulation and disclosure compared to an initial public offering, this view has recently been revisited by the Australian Securities and Investments Commission and Australian Securities Exchange. Since December 2016, the Australian Securities Exchange has increased the requirements on the process for a backdoor listing. This article explores the regulatory reform around backdoor listing. The analysis provided herein aims to achieve a balance between facilitating access to the capital markets by start-ups and ensuring that adequate investor protections are in place . Despite decades of backdoor listings, why have the Australian Securities Exchange and Australian Securities and Investments Commission now turned their attention to this practice? This article reviews prior literature, regulator material, financial media and capital market data to identify the challenges Australian entrepreneurs face when choosing between initial public offering and backdoor listing. This is against a backdrop of changing market fortunes and a government commitment to a policy agenda promoting innovation in business. To conclude, a number of suggestions and recommendations are provided to address these challenges, based on the current debate and longitudinal data.