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An ASX price query, or a speeding ticket, is commonly issued to companies that record unexpected share price movements without underlying news.
Is this really a big deal for companies.
The typical format of an ASX price query
The ASX will send the company a letter, sometimes pausing trading until the letter is responded to. The letter and the company’s response will be publicly disclosed on the Market Announcements Platform.
An ASX compliance officer will ask if the company has an explanation for its unexpected share price move. In particular, if there is confidential information that some sections of the market may know about.
The company receiving an ASX price query respond and dependant on the response either no further action will be taken or it will be issued with an Aware Query.
The latter course of action is likely if the company releases information immediately after receiving the price query, especially if the information in question is what has led to the share price rise.
An aware query will ask the about when it first became aware of the information and when it believed it was due to be released to shareholders.
Few companies will admit fault and will say they only became aware of the information shortly it was obligated to do so.
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Listing Rules underpinning an ASX price query
An ASX price query is underpinned by Chapter 3 of the ASX Listing Rules as well as continuous disclosure provisions in the Corporations Act.
Listing Rule 3.1 states that when a company becomes of information that a reasonable person would expect to have a material effect on the price or value of the security, the entity must immediately tell the ASX that information.
Examples listed in the relevant listing rule include a lawsuit, a material acquisition of disposal, a material study or if a company’s earnings will be materially different from expectations.
A company is exempt from disclosing such information in some circumstances.
These include if disclosure would be illegal, if the information is about an incomplete proposal or negotiation, if it is insufficiently definite to warrant disclosure, if it is a trade secret or generated for internal management purposes.
These exemptions respect the right of businesses to conduct business without giving a daily running commentary of the information.
Receiving an ASX price query due to a takeover bid
One of the most common circumstances why a company might receive an ASX price query is when it is in negotiations over an M&A deal and it gets leaked to the media.
The Listing Rules allow companies to negotiate potential deals behind closed doors and only disclose it when a proposal is definitive.
But sometimes it might get leaked to the press and the company is obligated to comment on the news. Most likely, the company will confirm there has been interest but that negotiations are continuing.
Take notice when your company receives an ASX price query
When your company receives an ASX price query, it is not the end of the world. By the same token, it is worth paying attention to.
As a general rule, companies are obligated to disclose price-sensitive information as soon as it becomes aware of it.
There are some exemptions, however, such as incomplete negotiations and trade secrets. These ensure that a listed business will not be at a disadvantage to unlisted businesses.
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