5 radical ideas for the Australian capital markets from North America that could reinvigorate investor sentiment

Our article title ‘5 radical ideas for the Australian capital markets from North America what could reinvigorate investor sentiment’ may cause some raised eyebrows. Do we really just want to ‘copy North America’? Is investor sentiment really that bad that we need ‘radical ideas’ to reinvigorate investor sentiment? Didn’t the ASX rise 6% in 2025?

Look, we get it, things could be worse, and we will never be as big as America. But there are concerns that new listings are at a 20-year low. It is true that 2021’s 191 listings was never going to be inflated, but it has been in decline since then. There has also been concern that many proposed floats were withdrawn amid uncertainty. Investors and advisors pointed to macroeconomic concerns like elevated interest rates, slower growth and geopolitical factors as deterring issuers from listing.

Some have blamed the ASX’s botched technological upgrades and say this will improve things. We will give credit where it is due for. the changes last year meaning all stocks start trading right at 10am rather than slowly opening in alphabetical order over 10 minutes.

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5 radical ideas for the Australian capital markets from North America

Dual class shares

Currently, companies listed (or seeking to list) on the ASX must have the same rights for all shareholders. But other exchanges allow companies to list with differing classes of shares entitled to different voting rights, dividend payments, and even additional privileges. The idea is to give founders continued control over their company that they would otherwise lose, whilst still allowing new capital.

For many years, it was only the US that allowed it but Singapore and Hong Kong have followed suit – they have put in some restrictions (such as only permitting it for certain high-growth sectors) but have followed suit nonetheless.

Atlassian bosses Scott Farquhar and Mike Cannon-Brookes both cited the ASX’s opposition to dual-class structured companies as why they went to list on the NASDAQ rather than the ASX. While not many other tech executives have not said this publicly, we wouldn’t be surprised if others have told the ASX privately. When you have the ASX expressing openness last year (saying,’ ASX is supportive of further consideration and debate on this topic’), we think this idea is a realistic possibility.

Voluntary administration laws enabling the possibility of a second chance

North America has a far higher of proportion of companies entering voluntary administration, then exiting and living to find another way. In Australia, most companies that exit are sold to another buyer but more often than not, that is the end.

In Australia’s regime, the administrator replaces management immediately. Whereas under America’s regime, there are companies that have been in administration multiple times in a decade. Of course, America’s laws are not a walk in the path either, while business owners/management stay in control as ‘debtors in possession’, they have to implement a reorganisation plan that creditors (and a court) must ‘sign off’ on.

This is an idea that extends beyond listed companies and into the entire Australian business world – likely requiring extensive parliamentary debate to the extent we wouldn’t see with any other ideas in this article.

Pre-planned share sales

The controversy of the year was when DroneShield (ASX:DRO) directors sold tens of millions in shares. Investors hate it when directors sell shares, especially if companies have rallied to the extent DroneShield had – expressing it as a sign of no confidence that there is further growth potential. But what shocked investors was the suddenness with which it occured.

In the U.S., insiders (directors, founders, executives, major shareholders) can adopt a written trading plan under so-called Rule 10b5-1 that sets out in advance how many shares they will sell (or buy), at what price or pricing formula, and on what dates (or according to what algorithm).

If this idea was implemented, investors would still hate directors selling shares, but they cannot claim they were caught ‘off guard’. Plus, if this was adopted in Australian law, it could stave off accusations of insider trading.

Once that plan is adopted, as long as the insider had no material non-public information (MNPI) at the time of adoption — and provided they relinquish control (i.e. cannot later influence timing or size) — then later trades under the plan are generally protected from insider-trading liability.

Moreover, they allow founders/execs to “sell down” gradually — rather than in one big block — which reduces market-shock risk and helps avoid signalling (whether negative or positive) that might be interpreted by other investors as a sign of insider knowledge or loss of faith.

Secondary markets

Some from the NSX may take offence at this idea, claiming the NSX is a ‘secondary market’. The NSX can only claim it is so in the sense it exists, but has too low liquidity and institutional participation to truly be in the same way the AIM or NASDAQ is.

Now, our idea may not necessarily need to be an entirely different entity to the ASX. It could be the same bourse but separated main and growth markets as happens in the UK. Perhaps some other reforms will need to be implemented to create the demand to support a true secondary market.

After hours trading

The ASX is only open 6 hours a day and most other markets are either open for that length or just an hour or two longer. However, other markets (including North America) enable after hours trading.

Now, it is important to keep in mind, after hours trading is only available to certain investors. Retail investors, typically do not have access to after-hours trading. This is because after-hours trading is usually reserved for institutional and high-net-worth investors who have the resources and expertise to navigate the risks and complexities of after-hours trading.

But this idea, if implemented, would allow those investors to re-act to news that comes after hours. And this would mean there’d be no incentive for companies to try and hide bad news in the evening.