Silver lining in slower capital markets

​The tale of this year's equity capital markets (ECM) is one of two markets: a shrinking NZX Main Board, but booming levels of secondary capital raisings, Chapman Tripp says.

“While we have only had one initial public offering (IPO) this year – Oceania Healthcare –the number of NZX Main Board issuers has fallen by eight, primarily driven by takeovers and insolvencies," says Chapman Tripp corporate partner, Rachel Dunne.

“Several New Zealand-based companies that may have listed on the NZX have instead headed offshore through trade sales or, in the case of some smaller cap companies, listings on overseas markets.

“Meanwhile, the NZX Debt Market has continued to perform strongly, with an 8.5% increase in listed debt securities year on year and over $4.1bn of debt raised in the year to date.” Dunne said this complemented the $2.4bn of equity capital raised by issuers in secondary capital raisings so far this year, with several further secondary equity capital raisings already announced to bring 2017 to a close.

While a shrinking NZX Main Board is disappointing, particularly with the departure of sharemarket darling Xero, Chapman Tripp doesn’t see issuers choosing to delist becoming a trend, Dunne said.

“Most New Zealand companies will continue to value the benefits of being listed – for example, Fisher & Paykel Healthcare, the largest New Zealand company on the NZX Main Board, has openly stated that it is not considering delisting.”

Some of the key benefits of retaining an NZX listing include simplified tax compliance and ease of trading for New Zealand investors and employees, eligibility for inclusion in New Zealand funds and indices and access to an attractive debt market with competitive interest rates for corporate bonds, Dunne said. Earlier this year, Chapman Tripp called for ASX-only listed NZ companies to “come home” and dual list.

Perhaps due to the limited number of primary equity capital raisings, the NZX has been busy, Dunne said.

“The first substantive review of the NZX Listing Rules since 2003 is well underway, and NZX has recently announced a five-year strategic plan for the stock market to take a more customer-focused approach.

“On the regulatory front, NZX is now up to 22 practice notes, a recent initiative to provide more practical guidance to issuers and their advisers.”

There has been some regulatory uncertainty following the general election that is likely to have affected the markets as well, Dunne said.

“However, there are already signs of activity brewing for the year ahead: Transport Investments Limited has recently completed a backdoor listing with Bethunes Investment Limited, which sees a sizable business listed, and Vodafone has also signalled that it intends to undertake an IPO of its local subsidiary in early 2018.”

 

 

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