What is Suspended Trading?
The Australian Securities Exchange (ASX) is a critical platform for companies looking to raise capital and gain visibility in the financial markets. For Australian firms, a listing on the ASX offers numerous advantages, but there are times when a company may choose to suspend trading of its shares.
Suspended trading occurs when the ASX halts trading activity due to serious concerns about a company’s assets, operations, or other financial information. The move is governed by the ASX Listing Rules and the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011. The ASIC Rules basically defines suspended trading as a suspension or stoppage in trading activity as defined by the Market Operator but this does not extend to suspension or stoppages due to technical issues in the system.
Understanding Suspended Trading
Under ASX Listing Rules Chapter 17 and ASX Operating Rule 3300, the ASX has the authority to suspend the trading of a security to protect investors. This decision is based on an investigation, and the ASX will issue a press release detailing the reason for the suspension, stressing it will not comment further for the duration of the suspension and while the investigation is in progress. Shares cannot trade until the suspension is lifted or expires.
There are various reasons where a suspension can be put in place:
Material Information Disclosure
One of the main reasons companies request a suspension of trading is to prevent the market from being misled by incomplete or incorrect information. When a company is in the process of finalising significant corporate actions—such as mergers, acquisitions, or major contracts—it may request a trading halt until all material information can be disclosed to the market. This ensures that all investors have equal access to the information, maintaining market integrity.
Pending Announcements
Companies may also suspend trading when they are preparing to make a significant announcement. This could include financial results, changes in senior management, or other major developments. A temporary suspension allows the company to prepare and disseminate the information properly, ensuring that investors have the necessary context to make informed decisions.
Regulatory Issues
In some cases, regulatory issues may necessitate a suspension of trading. This could involve ongoing investigations by regulatory authorities or compliance-related matters. Suspending trading allows the company to address these issues without the added pressure of fluctuating stock prices.
Market Volatility
Extreme market volatility can sometimes prompt a company to request a suspension of trading. This can be a protective measure to prevent panic selling or to provide time for the market to stabilise. It can also allow the company to address the underlying causes of the volatility.
Degrees of Suspension
Depending on the severity of issues outlined above, an ASX suspension may fall under one of three categories:
Trading Halt
In a Trading Halt, the company itself asks for the ASX, under Listing Rule 17.1, to temporarily stop trading its shares. A formal written request should outline the reasons and expected duration of the trading halt, plus supplementary information the market needs to know. Trading Halts can last no more than two trading days per Operating Rule 16.4.2.
Pause in Trading
The Pause in Trading often takes place at the ASX management level, particularly when certain market events involving one listed company occur. That company will be asked to provide the necessary information. The Pause will only be lifted if the ASX is satisfied with the data they have received.
Suspension from Quotation
Suspensions from Quotation are outlined under ASX Listing Rules 17.2 to 17.6. They are often the most serious measures the ASX can impose based on the results of the investigation, and the suspension may stay until inherent issues are finally resolved. The ASX can only suspend a company listing for up to two years.
Example of Suspended Trading
To explore how suspended trading works, let’s look at the case of Australian Vintage Ltd, which is listed in the ASX as AVG.
Australian Vintage started 2024 with strong revenue from 2023 at $258.6m, and efforts to achieve B-Corp certification. The company revealed in February 2024 that it was negotiating a merger with Accolade Wines. This was expected to significantly boost Australian Vintage’s export capabilities and open up new markets.
However, Australian Vintage decided on 28 May 2024 to suspend trading its shares until 11 June. The move was sought after Accolade pulled out of the merger negotiations, which was triggered when members of the Riverland CCW growers coop voted against a buyout deal it recently proposed. Australian Vintage explained that instead of their net debt at EOFY24 ranging from $43m to $50m, they recalculated it to as much as $75m. Worse, their stock prices went down 45 per cent at resumption of trading, prompting a $15m capital raise, and also selling two vineyards in the process to the Randall Wine Group.
The company, which is already reeling from the fallout of terminating CEO Craig Garvin for misconduct, expressed hope after trading resumed that Accolade will go back to the negotiating table. However, Accolade moved forward instead with buying the Australian portfolio of French alcohol company Pernod Ricard.
Conclusion
Listing on the ASX can be a badge of honour for a company seeking to grow the business, but various factors can force the bourse to put its trading on ice. The case of Australian Vintage illustrates how a well-timed suspension can help a company manage significant announcements and possibly maintain investor confidence.
DISCLAIMER: This article is for informational purposes only and does not supersede business advice. AVANTE PARTNERS has no relationships with the ASX or any listed firm.
