Is it better to take your company public?
ASIC wants more companies on the ASX — but does a public listing actually make a business succeed, or does it just take credit for success that was already coming?
Australia's corporate regulator wants to make it easier for companies to list on the ASX, and that is a sensible enough goal. But the push to streamline IPOs quietly sidesteps a more fundamental question: does going public actually make a business more successful, or is it just one way of accessing capital that gets outsized credit for outcomes mostly driven by something else?
ASX listings have been falling — but the diagnosis may be wrong
The number of companies listed on the ASX has been falling for over a decade. In 2014, there were 2,073 companies on the exchange. By 2024, that had dropped to 1,989. ASIC reads this as a warning sign: if good companies stay private, everyday investors miss out on the growth, and the regulator loses the transparency and oversight that public markets provide. Its proposed fix, allowing pre-prospectus advertising of share offers under tight constraints, is designed to help companies test market appetite earlier and reduce the cost and complexity of the IPO process.
The concern is legitimate. Public markets do things private markets cannot. They are liquid, meaning investors can exit more easily. They are transparent, subject to continuous disclosure obligations that force companies to tell the truth in something close to real time. They create a kind of commons for investment that does not require you to know a venture capitalist or have a family office on speed dial. All of that matters.
But none of it answers the original question. Going public is a means of raising capital. It is not a business strategy.
The listing validated the business model — it did not create it
The companies that are genuinely remembered as transformative, the ones that reshaped industries and generated extraordinary returns for shareholders, mostly share one characteristic: they had a product or service that people wanted more than the alternatives. Apple in the early 2000s was not saved by a capital raise. It was saved by the iPod, and then the iPhone. Amazon's dominance in cloud computing came from a decision to build internal infrastructure so robust they could sell it to others. Google's advertising monopoly was built on a search algorithm that was simply better than what came before.
Each of those companies did eventually access public markets. But the listing validated the business model rather than creating it. The capital that followed was a reward for having solved something real, not a tool that enabled the solution.
Many of the high-profile IPOs of the past decade, companies that listed at enormous valuations on the strength of growth projections rather than durable economics, have delivered miserable returns to public market investors while enriching the early backers who sold out on the way in.
This is not an argument against going public. Capital matters. A well-timed IPO can fund the infrastructure, the headcount, or the research and development that turns a viable company into a dominant one. The risk is in inverting the causality: treating the listing as the strategy rather than as a potential accelerator of one.
That inversion shows up in practice when companies go public before their fundamentals justify it, chasing the IPO as an end in itself. The record of such listings is not encouraging. Many of the high-profile IPOs of the past decade, companies that listed at enormous valuations on the strength of growth projections rather than durable economics, have delivered miserable returns to public market investors while enriching the early backers who sold out on the way in.
Pre-advertising retail investors is a risk ASIC's proposal has not fully resolved
ASIC's pre-advertising proposal does not obviously make that problem worse, and in fairness, the regulator's explicit concern is about maintaining healthy, liquid public markets rather than prescribing how companies should run their businesses. The constraints attached to the proposal, requiring companies to direct investors to the prospectus as the primary disclosure document, are reasonable, if imperfect.
The more permissive approach compared to the United States, where pre-IPO advertising to retail investors is generally not permitted, is worth watching. The US position reflects a judgement that advertising, even with disclosures attached, influences retail investors in ways that sophisticated institutional investors can better resist. That concern does not disappear because the advertising is technically compliant.
Private capital markets are not a problem to be solved
What the debate around ASX listing numbers mostly obscures is that the private capital markets absorbing companies that once would have listed are also providing genuine competition and genuine funding. That is not purely a problem to be solved. It is partly a market delivering what companies actually want.
The goal should not be to maximise the number of listed companies. It should be to ensure that listing remains an attractive and viable option for companies that are genuinely ready for it, while being honest that the businesses most likely to succeed are the ones focused on their product, their customers, and their competitive position. The public markets can fund that success. They cannot substitute for it.
Frequently Asked Questions
What is ASIC proposing to change about how companies list on the ASX?
ASIC wants to allow companies to advertise share offers to investors before lodging a formal prospectus, subject to constraints including directing investors to the prospectus as the primary disclosure document. The goal is to let companies test market appetite earlier and reduce the cost and complexity of the IPO process.
Why does going public not guarantee a company will succeed?
Listing on a stock exchange is a mechanism for raising capital, not a business strategy. The most transformative companies — Apple, Amazon, Google — had already solved a genuine market problem before or independently of their public listings. The capital that followed was a reward for proven value, not the source of it.
Why are fewer companies listing on the ASX?
The number of ASX-listed companies fell from 2,073 in 2014 to 1,989 in 2024. Part of the explanation is that private capital markets have grown as a genuine alternative, offering companies funding without the disclosure obligations and compliance costs that come with public listing — meaning the decline is partly a rational market choice, not purely a regulatory failure.
Is advertising a share offer to retail investors before a prospectus risky?
The United States does not permit pre-IPO advertising to retail investors, reflecting a judgement that advertising influences unsophisticated investors in ways institutional investors can better resist — even when disclosures are technically compliant. ASIC's more permissive approach warrants scrutiny on exactly those grounds.
What is wrong with companies going public too early?
Companies that list before their fundamentals justify it, chasing the IPO as an end in itself rather than as an accelerator of a proven business, have a poor track record. Many high-profile IPOs of the past decade listed on growth projections rather than durable economics, delivering poor returns to public investors while early backers exited at the top.