Capital Markets: Infinz seizing the opportunity

Commerce Minister Craig Foss at the Infinz Awards. Photo / Steven McNicholl

A new era has dawned for capital raising opportunities in New Zealand. On April 1 this year, new provisions of the Financial Markets Conduct Act 2013 (FMCA) came into force, bringing with them a vision to reduce the costs of small company offerings, facilitate the creation of low-cost exchanges for growth businesses and reduce the costs for companies raising capital.

Seizing these opportunities, however, is another matter and they will go begging if the private sector does not grasp them.

It's going to take courage and innovation from the market - and a change in mindset.

It will also require the effort of the entire capital markets community. Business owners, management, directors, trustees, legal and financial advisors - all will need to look with fresh eyes at how Kiwi businesses raise capital in the future.

The importance of New Zealand's capital markets can not be underestimated; up to $200 billion of fresh capital needs to be found in the next decade if we're to meet performance targets set by Government for our export sector.

So what new opportunities are now available?

New opportunities

Crowdfunding has been a phenomenon in recent years, and both crowdfunding and peer-to-peer platforms can now apply to the Financial Markets Authority (FMA) to become "licensed intermediaries". This status allows companies to use such platforms to issue shares or raise money from the public without having to go to the expense of supplying a full product disclosure statement (PDS).

There is a $2 million annual cap on how much equity a company may raise, or a borrower may borrow.

A simplified process is also available for small personalised offers. To qualify, the offer must seek to raise no more than $2 million in any 12-month period and must be limited to 20 investors - each of whom is connected personally or professionally to the issuer, either through previous association or through an expression of interest (angel networks).

The flexibility to establish lower-cost platforms for raising equity is another innovation the FMCA facilitates.

For those companies looking to raise more substantial amounts of equity, NZX is consulting around a New Market, which it will launch later this year, targeting businesses with market capitalisations between $10 million and $100 million. To simplify the initial public offer (IPO) process and reduce listing costs, it's proposed businesses will not be required to provide prospective (forecast) financial information or full continuous disclosure.

The New Market will also operate in a streamlined regulatory environment, with simpler, template-based rules and procedures.

For companies looking to raise debt or equity from the public, the FMCA provides flexibility for much-reduced disclosure requirements where the issuer already has listed debt or equity securities in the marketplace.

For companies looking to list on the sharemarket for the first time (an IPO) or to offer a new class of securities to the public, the issue of a PDS will in future be required. The intention is this will be both shorter and more relevant than existing prospectuses. Much of the financial detail will be required to be placed on an online register, which can be accessed by potential investors.

But reducing the costs of producing mammoth prospectuses - running up to 250 pages long - is only one objective of the reforms. Another - and equally important - objective is to produce offering documents that are more accessible to the investing public, with the law requiring they be "clear, concise and effective".

The recent Investment Statement produced for the IPO of Genesis Energy was something of an informal dummy run; it contained key information about the company while running to just a quarter of the length of the Mighty River Power combined offer document.

There will be further potential for step-change improvements when the new regime comes into full force on December 1.

New thinking required

So the ball is now firmly in the private sector's court. The challenge for the entire capital markets community will be to embrace these new provisions wrought by the FMCA and seize the opportunities they can create. Our wider New Zealand economy depends on it - and along with it the success of many great New Zealand companies.

Infinz is committed to playing its part, and "Seizing the Opportunity" will be the theme of the organisation's 2014 conference, scheduled for October 30 in Auckland.

INFINZ CONFERENCE 2014: SEIZING THE OPPORTUNITY

Following the regulatory reforms, including the Financial Markets Conduct Act, the ball is firmly in the court of the private sector to take full advantage of the fresh and innovative opportunities to raise capital. Be briefed by FMA/MBIE on these new opportunities. Hear from the NZX, which is launching the New Market for growth businesses. 2013 has been a record year for listings on the stockmarket - what are the lessons and learnings from recent issuers?

How can we enhance the effectiveness of corporate governance in NZ? What are the changing expectations of directors of their CFOs and treasurers? Hear case studies from CFOs and treasurers on capital management, implementation of treasury systems and best practice financial risk management.

The Infinz Conference, to be held in Auckland on October 30 is for business owners, directors, CEOs, CFOs and Treasurers, fund managers, corporate finance advisors, sharebrokers and corporate lawyers. infinz.com.

Infinz industry awards

A record turnout of more than 800 guests is expected at Auckland's Langham Hotel this evening for the annual Infinz Industry Awards. At the black tie dinner, the capital markets industry will recognise the success and professional standards of leading participants. Infinz presents awards in corporate treasury, banking, funds management, sharebroking, equity analysis, investor communications, best debt issue and debt deal and equity deal and for the best mergers and acquisitions transaction. A Leadership Award is also presented.

APN NZ Media is media partner for the Infinz Industry Awards. The NZ Herald's The Business is sponsor of the Institutional Banking Innovation Award.

About INFINZ

Infinz is the leading industry body for capital markets professionals in New Zealand. It has a membership of over 700 individuals, drawn from across the capital markets and includes treasury professionals, investment analysts, fund managers, bankers, lawyers and students.

• Anthony Quirk, is CEO of Milford Asset Management and Chair of the Institute of Finance Professionals New Zealand (INFINZ).