Surviving the Bears: New technology's role in efficient and effective markets

Stan Malcolm and Marcelle Ashcroft. Photos / Supplied

Link Market Services manages one of the country's two share registries but it could easily pass as a resourceful technology company.

During the Covid-19 pandemic when staff members were stuck at home, online activity became an essential business tool — and still is.

National share registry and financial services provider Link Market Services kept the obligations to the New Zealand Stock Exchange ticking over smoothly with its ground-breaking online technology.

A day after the country went into lockdown on March 25, 2020, listed company Evolve Education Group used Link Market's virtual meeting platform to stage its special meeting. Shareholders could watch, ask questions and vote through the online platform.

Virtual annual and special shareholders meetings have now become commonplace and will continue to be, saving travelling time and cost.

Link Market, part of the Sydney-based Link Group with global operations, became the third company in the world to develop a virtual meeting platform.

"We were keen to be the first company to introduce the platform to the New Zealand capital markets," said Stan Malcolm, Link Market's head of business development and strategy.

The company is clocking up nearly 100 virtual annual and special meetings a year, sometimes three or four a day.

Link Market first started working on the platform in 2015 and attracted the interest of Spark. "We spent a lot of time with Spark beta testing the platform against DDoS (Distributed Denial-of-Service) attacks and making sure it was bulletproof. Spark was keen to introduce it to their annual meeting programme," said Malcolm.

The virtual meeting platform is now so sophisticated that it feels like shareholders are there in person. "We've turned the meetings into television productions," said Marcelle Ashcroft, Link Market managing director. "We may have four directors in a room, two others are beamed in from overseas, and two large shareholders are on the line. Our software marries up all the communication streams and puts everyone in one room. We can manage this seamlessly.

"You can have a virtual component to a physical meeting and double the attendance. In the old days, analysts would have to get on a plane and fly to the annual meeting. Now, they can sit at their desk, log on, watch and make their conclusions", said Ashcroft.

"Many shareholders were disenfranchised because they lived out of town and couldn't make the annual meeting. Now, they can participate and vote through the virtual platform."

Ashcroft said Link Market's drive has been to develop something new for the market every year.

"We operate in the background but it's important that New Zealand's capital markets run efficiently and effectively.

"We want to help make the markets more technology-focused for the good of everybody — and also make it the best place for listed and unlisted issuers."

Established in 2005, Link Market provides registry management; meeting, payment and investor communication; estate administration; insolvency services; shareholder analytics; and investor relations.

The registry services support a range of issuers, listed and unlisted, small and large, domestic and international; and structured products including managed funds outsourcing, fixed interest and warrants.

In 2006, Link Market bought the National Bank debt registry with $7 billion of assets under administration. This has grown to $300b worth of bonds, commercial paper, and fixed and floating-rate notes, handled by listed and unlisted companies, councils, banks and others.

"We run the process, collect the cash and settle it with large institutions. We can pay up to $2.5b on one day and every payment has to be 100 per cent correct," Ashcroft said.

"Even paying dividends to shareholders, you don't get a second chance. If you make a mistake or miss a deadline, then everyone hears about it."

Link Market was co-founded by Ashcroft, Malcolm and operations manager Lynn Wilson after then NZX chairman Mark Weldon wanted to introduce competition in the registry business.

Link Market was a joint venture between NZX and ASX Perpetual, an Australian share registry, and its first move was to buy BK Registries in Ashburton in 2005 — Link Market still operates the office in the South Canterbury town.

Ten years later Pacific Equity Partners took over ASX Perpetual, bought out the NZX holding and changed the name to Link Group, with Link Market Services retaining its identity.

Since 2005 Link Market has increased its market share from 7 per cent to more than 50 per cent.

The go-ahead company manages the register for 219 issuers including 104 of the 186 listed stocks and 59 of the 155 listed debt securities. It is also the registry for two KiwiSaver schemes.

Link Market looks after six of the NZX top 10 stocks — Fisher and Paykel Healthcare, Spark, Auckland International Airport, Contact Energy, Infratil and Ryman Healthcare — and 10 of the largest 20 issuers by market capitalisation.

Its biggest register is Air New Zealand with 53,400 shareholders.

Auckland-based Link Market has grown its staff from three to 72.

When Link Market first started shareholder communication was by the laborious mail system. The company soon introduced emailing and shareholders could click on a link for the proxy form or capital raising. It saved the issuers tens of thousands of dollars. "They were very grateful," said Malcolm.

Link Market revamped the shareholder statements, giving them more information and a better experience. The company built and developed a website with investor portals to check their holdings and change personal details. It introduced SMS messaging.

The registry service delivery was suddenly more efficient and effective. "We've always wanted to lead the market with technology," said Malcolm.

All capital raisings are completed online. The first one was the Trade Me initial public offer in 2011, and one of the more challenging was the recent Air New Zealand $1.2b rights for new shares offer. Mums and dads - rather than institutional - investors climbed in and many were unsure what the offer actually entailed.

"Air New Zealand was a massive capital raise and it wasn't straightforward," said Ashcroft.

"Most Mum and Dad investors don't have a financial adviser and they called us.

"They were confused about the calculation between rights and shares and we educated them. It was a challenging time and our staff showed remarkable patience.

"We took thousands of calls and emails — our staff members are trained for customer service as well as making payments. Our team members talked them through it on the phone while they were applying.

"The capital raise was very successful and everyone got what they wanted," Ashcroft said.

Looking ahead, Link Market wants to refresh its Issuer Services portal on its website where customers can log in and get data. "We are going to issuers to see what other
information they would like posted — and this could be customer-led," Malcolm said.

Link Market is planning to rejig and relaunch its ShareMeUp product which operates through a micro-investing app. It's effectively a savings plan.

"We've had so many people wanting to invest in capital markets but they might not have $1000 to spend at once," said Malcolm.

"They have to have a minimum shareholding as per the NZX listing rules but they can add to it by making weekly, fortnightly or monthly payments of at least $50.

"We didn't want to increase the registry of shareholders with individual holdings of 10 or 20 shares, but they can build their shareholding directly through the app (first developed in 2018)."

Malcolm said the holdings are held on the main registry — not under a custodian as is the case with Sharesies. "The investor holds the shares outright, and we want to show a bit more love to ShareMeUp this year."

Ashcroft said "technology has always been a big part of our business. There is a lot of problem-solving involved and we are keen to expand our ideas for the betterment of the capital markets.

"The NZX can't do it on its own. We want to see more companies listed on the NZX. One of the difficulties for the NZX is companies have to show a lot of commitment for listing a few years out by establishing the right board structure, chief executive processes and getting their financials in place.

"Whatever we can do to make this happen, we are keen to participate."

• Link Market Services is an advertising sponsor of the Herald's Capital Markets report.