The Business Herald’s markets and banking reporter.

Stock Takes: Brokers invited to join the crowd

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Small firm pitches capital raising at big end of town.
Warren Buffett took over Berkshire Hathaway 50 years ago. Photo / AP
Warren Buffett took over Berkshire Hathaway 50 years ago. Photo / AP

New Zealand's latest equity crowdfunding campaign is being pitched to sharebrokers, suggesting the big end of town might have a role to play in the new capital-raising route for small, fast-growing businesses.

Equity crowdfunding - which involves firms selling shares to the public via an online platform - became possible last year after a law change.

Auckland-based Invivo Wines this week announced plans to raise up to $2 million in growth capital through Snowball Effect, one of the first platforms to receive a licence from the Financial Markets Authority.

If fully subscribed, the offer will become New Zealand's biggest equity crowdfunding round, beating the $1.5 million Kiwi drone company Aeronavics raised through Snowball Effect last month.

Invivo, which has British talkshow star Graham Norton as an investor, has hired John Moore of Miro Capital Advisory as a capital-raising adviser.

Moore, who established Miro last April after leaving Craigs Investment Partners, has pitched Invivo's Snowball campaign to a number of traditional sharebrokers, which he declined to name.

"We've come up with a way that we can get brokers and broker clients involved in the raising in a way that works for the brokers, works for Snowball and, most importantly of all, works for Invivo and helps raise the money," he said.

The possibility of Invivo pursuing an IPO on NZX's soon-to-launch NXT market, possibly within the next year, was also helping to pique brokers' interest in the wine company, he added.

Little threat

As companies can't raise more than $2 million through equity crowdfunding in any 12-month period, platforms like Snowball Effect don't pose a threat to even the smallest end of the traditional IPO market.

The minimum capital raising on NXT, which will replace the NZAX junior market, is $5 million.

But if brokers do board the crowdfunding train they could provide small businesses with access to large pools of capital.

Whether brokers' old-school clients have an interest in these new-fangled funding platforms - and the businesses that raise cash through them - remains to be seen.

Onward, upward

Fisher & Paykel Healthcare has made several appearances in this column over the past year. But the medical device maker's share rally is worthy of another mention.

The stock hit a record close of $6.85 last Friday, before losing some ground this week, closing last night at $6.72.

It's been a remarkable rise, considering the stock went as low as $1.89 less than three years ago as the exporter's profits came under pressure from the high Kiwi dollar.

Since then, it has come to terms with the currency through a successful hedging programme, new products and an increase in production at its lower-cost plant in Tijuana, Mexico.

F&P Healthcare reported a 10 per cent lift in half-year profit to a record $48.9 million in November.

Between the interim result and last Friday's record high, the stock gained 22 per cent, despite not a single price-sensitive announcement being released by the company.

A senior client adviser at sharebrokers OMF, Daniel Metcalfe, attributed the stock's surge to weakness in the Kiwi dollar and the healthcare sector being in vogue with investors.

Even at the current prices, Metcalfe reckons F&P Healthcare shares could push higher.

"I think it could move up to seven bucks [a share]."

That would value the company at almost $4 billion.

Short sell fail

A new scheme allowing international traders to short-sell Chinese stocks made a disappointing start this week.

The facility allows foreigners to make bets on price falls in Chinese shares, using a trading link between the Hong Kong and Shanghai exchanges that started last year, giving overseas investors access to China's market for the first time.

But on Monday, the first day of the scheme, not a single short-sell trade was completed, according to the Financial Times.

The FT reported that the facility had shortcomings, including tight restrictions on the number of shares foreign traders can sell.

A surge in Chinese equities may also have reduced demand for shorting stocks.

Berkshire outlines AGM

Warren Buffett sure knows how to throw a shareholders' meeting.

The Oracle of Omaha has just released his 50th annual letter to investors in Berkshire Hathaway, which gave details of the AGM on May 2.

Almost 40,000 people attended last year, a record, and an even bigger turnout is expected this year as Berkshire celebrates the golden anniversary of Buffett's takeover of the firm.

The event will kick off at 6.25am, when two Texas Longhorns will make a procession down 10th St in Omaha, Nebraska.

That will be followed by the company's fourth International Newspaper Tossing Challenge, which involves participants throwing papers 10m onto a porch.

Buffett claims he tossed about 500,000 newspapers in his "one brief flirtation with honest labour" as a teenager.

There is some serious business on the agenda, including a panel session in which Buffett and his right-hand man Charlie Munger will answer questions.

Berkshire shares closed down at US$144.92 yesterday.

- NZ Herald

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