The new stock exchange is designed for small and medium sized companies to raise money. Image / Supplied
The new stock exchange is designed for small and medium sized companies to raise money. Image / Supplied
A new stock exchange is to be launched targeting small to medium-sized companies that want to raise up to $20 million a year from the public.
Called Catalist the exchange has been licensed to open a public market from June 21 for businesses too small to list on the NZX.
Colin Magee, Catalist chief executive, said it had been working on the licence with the Ministry of Business, Innovation and Employment and the Financial Markets Authority over the past two years.
"SMEs make up a majority of New Zealand businesses, so there's a real need for those with growth potential to have better access to capital, and equally for investors to have better access to SME investments, to increase economic growth and job creation."
He said Catalist's public market means smaller businesses would be able to access public investment with significantly lessened costs and administrative burdens and without compromising investor protections.
"We're already working through the listing process with a number of businesses - and investors can sign up for an account on our website, so they can trade when there's an auction running."
The New Zealand Stock Exchange has previously tried to run a trading market for SMEs and high growth companies but ended up pulling the pin on it after it failed to attract enough new listings.
Magee said Catalist would differ from the NZX by using regular auctions rather than continuous trading.
He said this would allow for fairer pricing and increased liquidity for financial products that don't trade very often.
Colin Magee is chief executive of Catalist. Photo / Supplied
Businesses would only be required to disclose information for each auction rather than on a continuous basis like on the NZX.
Magee said traditional stock markets did not work for SMEs because of the costs and time spent on compliance.
"In the past, we've seen growth markets, such as NZX's 'NXT' take a traditional continuous trading approach and fail to meet the needs of SMEs. We've taken the learning from that and use periodic trading and disclosure instead, which has proved successful in other jurisdictions."
Magee said Catalist would be designed as a stepping stone market where once businesses had reached a certain size they would be helped to move on to a traditional stock exchange.
Commerce and Consumer Affairs Minister David Clark said Catalist Markets would provide a simpler and more affordable "stepping stone" for SMEs to raise capital.
"This is a big win for kiwi businesses and it ties in well with the Government's focus on securing an economic recovery in the wake of Covid-19. Through Catalist, SMEs looking to grow into larger enterprises have a new means of getting there.
"It's also fantastic news for consumers, who will have fresh investment opportunities, and greater choice when it comes to diversifying their portfolios."
Small Business Minister Stuart Nash said many early-stage companies would benefit from raising capital but could not afford the initial and ongoing costs of listing on traditional exchanges.
"For businesses wanting to grow, the alternative to listing is to raise money privately. This can be difficult in New Zealand due to limited access to pools of capital, across both equity and debt markets.
"Supporting SMEs to grow and thrive is a key element in our five-point economic plan, with the overall objective of encouraging productive, sustainable, and inclusive economic growth."
