Trade Me mooted for tech share sales

Shares in up-and-coming high-tech firms could be listed alongside used cars, furniture and assorted bric-a-brac on popular internet auction site Trade Me under a proposal being considered by the Government.

Selwyn Pellett, chief executive of Endace, and John Blackham, chief executive of software company Xsol, made the suggestion during talks last year with Prime Minister Helen Clark and Finance Minister Michael Cullen.

A spokesman for Cullen yesterday confirmed the approach had been made and Cullen was to discuss the proposal with Commerce Minister Lianne Dalziel.

"We were discussing the problems with growing high-tech companies ... Capital raising has been an ongoing one since time immemorial," said Pellett.

The idea of trading shares on Trade Me was one of about 20 suggestions tabled.

"The concept is that no individual investor could invest more than $10,000 - that's no more risk than buying a second-hand car."

He said listings on Trade Me could contain information on the company's directors, founders and technology and allow feedback from third parties.

"People would, over time, get a feel for the companies that were investable."

Pellett said he and Blackham were told to refine the idea and bring it back to the Government for further consideration. They had been working on that when the story broke - before they had spoken to Trade Me founder and chief executive Sam Morgan.

Morgan said he had been surprised to learn of the proposal earlier this week. "It's all basically news to me."

Trade Me was a good way to find a price for buying and selling goods and services but was not well set up to perform registry functions which would be necessary to trade shares.

"If we were to do anything in that space we would make sure that it was safe for consumers and investors."

Nevertheless, he was clearly interested.

But National Party finance spokesman John Key called the idea crazy.

"There's a vast world of difference between buying a second-hand motor mower and buying a share script, and I would have thought Dr Cullen would have realised that," he said.

"We just spent the last 10 years cleaning up the Wild West image of the capital markets.

"Raising capital through an auction website would be an extremely risky business for everyone - companies and investors."

Key pointed out that stock exchange operator NZX already had a lower-cost secondary capital market, the AX, and there was another alternative in the Unlisted online market.

NZX chief executive Mark Weldon said investors were best served "where they have access to all material information about the companies they invest in, and where there is a strong technology base not only for the trading of shares, but for their clearing, settlement, registration and custody".