NZX's new growth market, created especially to make listing easier for small and medium businesses, will launch mid-year 2014 if all goes to plan.
“The process is to seek ministry approval to change disclosure requirements in this market from continuous disclosure, which is the way the NZ Alternative Market (NZAX) and the main stock exchange (NZX) works, to periodic disclosure. That requires ministerial extension to clear that. We are going through that process now.
“The second part of the regulatory process is to seek approval for the rules for the new market and approval for the market itself. That requires relevant market authority approval. Those are ongoing. I would not like to put a deadline to it, but we are aiming at late June or early July this year,” says Aaron Jenkins, head of markets at NZX.
The market, which is being created to give growing companies an avenue to access growth capital, will have a different set of rules from the NZX main board and NZAX. These will include elements such as the removal of the need to forecast financial information before filing an IPO and a change in disclosure requirements from the current continuous disclosure to periodic disclosures.
Jenkins, who pointed out that around 40 per cent of all new listings in the NZX last year came from the tech sector, believes that the new market will be of relevance to tech companies in the country.
“It is relevant to all sectors. It is not just the tech sector that is growing and requires expansion capital, it is all sectors that require that. The tech sector is one of the more obvious examples because they are experienced in venture capital raising techniques and it is also our fastest growing export sector, so it is a sector that we focus on.
“It is too early to say what percentage of firms in the growth market could be from the tech sector. Our focus currently is on developing the rules and getting market approval. We think it would be similar numbers to the NZX, but it could also change with the business environment. It might be too early to say in percentage terms what it is likely to be other than that we think it would be wildly attractive to the tech sector,” said Jenkins.
While some rules are being relaxed for entry, Jenkins states that companies looking to list in the market should be fully-functioning entities, with proven capabilities and a market capitalisation of at least $10 million. This is in addition to having a board with independent directors and an external auditor who has been approved by the NZX and changes every five years.
“Some of the businesses coming in might be established firms, just smaller and not appropriate for the main board. The disclosure rating will certainly be different with the move to periodic disclosure. So what we would be expecting of investors in this market is a lot more experienced investors that have invested in direct equities in the past, and see this as part of their growth portfolio. First time investors will not really fit this market,” says Jenkins.Read more: GeoOp hopes to trade on NZAX from October 31
New listings to the NZAX will be stopped with the launch of the growth market, and the plan is to eventually move all firms currently on the NZAX to the growth market.
“Over time we will migrate companies from the NZAX to the growth market and potentially shut down the former. But that is months away, if not years. The focus now is to launch the growth market and to attract companies to it rather than necessarily change the NZAX,” says Jenkins.
The NZAX currently has around 18 listed firms, and includes tech firms such as VMob and GeoOP.