Wellnex Life’s Forecasts Spark ASX Compliance Probe and Retraction
The ASX has challenged Wellnex Life Limited over its recent shareholder announcement featuring forward-looking financial forecasts from SP Angel, prompting a mandated retraction due to disclosure shortcomings.
- ASX questions reliability and disclosure of Wellnex Life's financial forecasts
- Forward-looking statements from SP Angel's research report deemed non-compliant
- Wellnex Life confirms drafting and approval of announcement including broker report
- Company acknowledges need to retract financial forecasts following ASX scrutiny
- ASX highlights continuous disclosure obligations and legal risks of misleading information
Background to the ASX Inquiry
Wellnex Life Limited (ASX: WNX), a healthcare company listed on the ASX and AIM, recently released a shareholder letter that included a research report by UK broker SP Angel Corporate Finance LLP. This report contained forward-looking financial forecasts extending from 2024 to 2029. Shortly after the announcement, the ASX raised concerns regarding the compliance of this disclosure with the Listing Rules and the Corporations Act 2001.
The ASX's scrutiny focused on whether the forecasts were supported by reasonable grounds, the clarity and consistency of financial terminology used, and whether the company had implicitly endorsed the broker's projections by publishing the report on its website.
Key Issues Raised by ASX
The ASX's query letter sought detailed explanations from Wellnex Life on multiple fronts: who drafted and approved the announcement, the nature of the engagement with SP Angel, the timing and process of report review, and the assumptions underpinning the financial forecasts. The regulator emphasized the importance of transparency and reliability in forward-looking statements, referencing ASIC's Regulatory Guide 170 which sets out the standards for prospective financial information.
ASX also highlighted that publishing broker research reports on a company's website, especially those containing price targets or earnings estimates, can imply endorsement and must be handled with care to avoid misleading investors. The regulator noted that such disclosures must be factual and not promotional in nature.
Wellnex Life's Response and Retraction
In its response, Wellnex Life confirmed that the announcement was drafted and approved internally, including the incorporation of SP Angel's research. The company clarified the terminology inconsistencies regarding gross profit and revenue growth figures and disclosed the terms of its broking arrangement with SP Angel.
Importantly, Wellnex Life acknowledged that the financial forecasts did not meet the stringent disclosure requirements and agreed to retract the forecasts. This retraction was necessary to comply with ASX's continuous disclosure obligations and to mitigate the risk of misleading the market.
Implications for Investors and the Market
The ASX's intervention underscores the regulatory emphasis on accuracy and transparency in financial disclosures, particularly forward-looking information that can influence investor decisions. Wellnex Life's share price had surged following the initial announcement, only to be suspended pending the company's satisfactory response to ASX's queries.
Investors should now exercise caution and await further updates from Wellnex Life as it navigates these compliance challenges. The episode highlights the delicate balance companies must maintain when sharing broker research and forecasts with the market.
Bottom Line?
Wellnex Life’s compliance setback serves as a cautionary tale on the rigour required for forward-looking disclosures in today’s regulatory environment.
Questions in the middle?
- What revised financial guidance will Wellnex Life provide following the retraction?
- How will the ASX’s scrutiny affect investor confidence and Wellnex Life’s share price trajectory?
- Will Wellnex Life alter its approach to publishing third-party research and forecasts in the future?
