The NZX has cleared a path for more listings on the exchange. Photo / File
The NZX has cleared a path for more listings on the exchange. Photo / File
The NZX has changed its rules to encourage existing companies to list directly on the exchange.
The amended rules, approved by the Financial Markets Authority last month, have removed the requirement for prospective financial information - profit forecasts - to be included in company listing profiles.
The new rules willalso introduce a framework to help clear the way for more overseas "foreign exempt Issuer" applicants, through specifically designed templates.
Then there is the so-called "compliance" listing, otherwise known as a direct listing, when companies with an existing capital base and shareholders debut on the market without raising fresh capital.
Hamish Macdonald, the NZX's head of external relations, said the issue was identified in the Capital Markets 2029 report, released last year, to promote alternative pathways for companies to gain a listing.
Macdonald said direct listings meant companies did not have to have an initial share distribution.
"You don't necessarily need a broker for the listing because you are not issuing or selling shares through the transactions," he said.
"What this means is that a broader range of advisers and parties can bring companies through for listing," he said.
Pushpay, which listed in 2014, was an example of a corporate law firm carrying out the direct listing process for the company.
Macdonald said a direct listing meant listing prospects did not have to gain the investor support typically required by an IPO.
"It makes the process less complex in some ways because you don't have the capital raising component and therefore do not have the costs associated with that," he told the Herald.
"And what that means is that the risk profile is different from that of an IPO, because you are not raising that capital.
"The shareholders are already there and will receive additional shareholder protection as a result of the listing that follows.
"Recognising that, they have a different risk profile than an IPO - and you are not obliged to provide a prospective financial information, or forecasts."
Preparing prospective information is costly, requiring professional advice and audits.
Macdonald said the costs of preparing that information - $150,000 to $450,000 - sometimes outweighed the benefits of providing it.
The exchange's moves had received favourable feedback from a number of interested parties, including the New Zealand Shareholders Association.
Last year's Capital Markets Report said there were 1200 or so companies earning more than $30 million a year who may be suitable for a direct listing.
Macdonald said the Covid-19 period had seen a large number of companies raise funds through some successful capital raisings via the NZX, thereby highlighting the benefits.
CM Partners principal Tim Preston. Photo / Supplied
Tim Preston, principal of CM Partners - which specialises in bringing small to medium sized companies to the market - said the move would make the NZX a more attractive prospect for many companies.
Preston said having to provide prospective financial information often came at a huge cost to listing hopefuls.
In addition, that information had to be validated to a level that directors were prepared to sign off on them.
"It was a real negative to try to get directors to come on board with fast-moving growth companies because, by their very nature, their earnings can be quite dynamic," he said.
"So for a director to have to put his name and reputation on the line was quite an inhibitor as well," he said.
"This is a good move and that it should encourage companies to seriously look at a direct listing on the NZX," he said.
