Every week, some ASX-listed companies suddenly stop trading, often just before big news. Here’s what a trading halt is, why companies ask for one, and what shareholders should expect.
A trading halt is a temporary pause in the trading of a company’s shares on the Australian Securities Exchange. While a halt is in place, investors can’t buy or sell the company’s shares on the market.
Companies usually ask the ASX for a halt themselves, and announce it in a short statement that explains why and how long it’s expected to last.
Why companies call a halt
Under the ASX’s continuous disclosure rules, listed companies must immediately tell the market about any information that a reasonable person would expect to have a material effect on their share price.
Sometimes a company has big news that it isn’t ready to announce in full, or it has a deal that’s nearly finalised. Rather than let its shares trade while some people might know more than others, it asks for a halt.
Common reasons include capital raisings, where a company sells new shares to investors to raise money, takeover offers, major acquisitions or asset sales, significant contract wins or losses, and results that are far different from what the market expected.
For capital raisings, the halt gives the company and its advisers time to approach large investors and set the price of the new shares before the deal is announced.
How long they last
A trading halt can last up to two trading days. Most end sooner, as soon as the company makes its announcement.
If a company needs longer, it can ask for a voluntary suspension, which can last much longer. The ASX can also suspend a company’s shares itself, for example if it fails to lodge its financial reports, breaches the listing rules, or the ASX has concerns about whether the market is properly informed.
What it means for shareholders
During a halt, shareholders can’t sell their shares, so they’re exposed to whatever news comes out.
When trading resumes, the share price can move sharply. A takeover offer often sends shares higher, while a discounted capital raising or a profit warning can push them lower.
A halt isn’t necessarily bad news. Many are called simply to manage the timing of an announcement fairly.
Price queries
Sometimes the ASX notices unusual movements in a company’s share price or trading volume without any announcement to explain them. It can then send the company a price query, sometimes called a “speeding ticket”, asking whether it is aware of any information that hasn’t been announced.
The company must respond publicly, and if it does have undisclosed information, it may need to announce it straight away or call a trading halt.
The aim of all these rules is the same: to make sure every investor, large or small, gets important information at the same time.
