NZX considers one platform for all listed stocks

The NZX looks set to ditch its "junior" boards - NZAX and NZT - in favour of just one board for all its stocks.

The stock exchange operator said it was reviewing its current equity market structure in response to market feedback, adding the present setup was not effectively meeting the needs of New Zealand's smallest listed companies.

"NZX wanted to communicate with the market now given a likely outcome of this review will be to consolidate all NZX's equity markets (NZSX, NZAX and NXT) on to a single board," it said.

NZSX is the original main board. The NZX Alternative Market (NZAX), which started in 2003, is the marketplace for small to medium-sized, fast growing businesses seeking an efficient capital raising facility. NXT, established in 2015, is aimed at small and mid-sized businesses.

In a statement, the exchange said it was considering whether differential requirements for smaller companies should be part of the solution and, if so, how that may be achieved through a simplified equity board structure.

"The NXT Market hasn't developed as quickly or effectively as we had hoped," NZX chief executive Mark Peterson said.

"NZX has been speaking with the market for some time about how we can look to simplify the structure and operation of our equities markets to ensure its design meets the needs of everyone," Peterson said.

Chapman Tripp partner and merger and acquisition specialist Rachel Dunne said the NZT had not worked because it not have the "buy in" from the broking community.

In its statement, the exchange said it would engage with all stakeholders over the coming months, "including working with current and potential listing candidates to provide the right path for them".

Peterson said the NZX would start a formal consultation process on the structure of its broader market and a review of its listing rules for its main board companies in the third quarter of this year.

Harbour Asset Management portfolio manager and analyst Shane Solly said a transition to one board would be a welcome move, but that standards of disclosure for all listed stocks would need to remain high.

"We are obviously keen to have a broader range of companies to invest in that provide different business opportunities," Solly said.

"Historically there has a been a differentiated disclosure regime between the different markets," he said.

Bringing the markets together may allow businesses to evolve, Solly said.
"Companies will need to deliver information and governance standards that are of a high level," he said.

Chapman Tripp, in a report issued in February, questioned the effectiveness of the NZX's "junior" markets.

"We also wonder, in light of the difficulties the NZAX and now the NXT market have had in developing a strong pipeline of new issuers, whether the NZX will conclude that the New Zealand market is simply too small to sustain these junior boards - especially given the early success of crowdfunding, which allows companies to raise money from the public without having to list," the law firm said at the time.

Chapman Tripp's Dunne said today's move by the NZX was a welcome one.

"The biggest thing that we are concerned about is making sure that the move from the junior boards to the main board is compulsory," she told the Herald.

When NXT was formed, NZAX companies were able to stay on that board if they wanted to, and were not forced to shift.

"That left the NZAX in limbo. It was closed to new listings with 15 companies stranded on that board with not a lot of trading going on - and only four on the NXT."

Dunne favoured a compulsory transition from those two junior boards through to the main board, but with a period of grace to allow them to make the adjustment.

The capital markets task force was established in 2008 by the then Minister of Commerce, Lianne Dalziel, with the aim of getting government and the private sector work together to develop New Zealand's capital markets.