New Zealand companies opting to list solely on Australia’s securities exchange, the ASX, must comply with two regulatory environments when they needn’t have to, Chapman Tripp says.
The ASX visited New Zealand this week, meeting with prospective listings and also hosting an event to provide a compliance update for those companies that are already listed.
“Forgoing listing on the NZX in favour of just the ASX is a trend we’ve seen with smaller cap NZ companies – probably due to the perception that there is less regulation involved,” says partner Rachel Dunne.
“However, a New Zealand-incorporated company listing solely on the ASX must comply with New Zealand law, and also with the ASX listing rules. That means that any corporate action that such a company chooses to take requires advice from both New Zealand and Australian advisers, which isn’t cost effective.”
The ASX does, however, provide access to a significantly larger pool of capital, she said.
“The purpose of listing in any market is ultimately to enable a company to have better access to capital for growth.
“We know that some of the largest Australian investors have restrictions in their investment mandates that mean they cannot invest in companies that are not ASX-listed.
“However, that benefit can be achieved by having a primary listing on NZX and then listing on ASX as a Foreign Exempt Listing.”
Almost all of the New Zealand companies that have chosen to list solely on the ASX would have been able to qualify as a Foreign Exempt Listing, she said.
“That means they could have had their primary listing on NZX, and then listed in Australia as a Foreign Exempt Listing, meaning they’d only have to comply with New Zealand’s regulatory regime.”
New Zealand is obviously a smaller market and being a smaller company in such a market means companies are more likely to receive investor attention, Dunne said.
“In fact, if you were a company with a $100m market cap, and you listed on the NZX, you sit at around the 100 mark in terms of the list of companies. On the ASX, in comparison, you’d be sitting at the over 2000 mark. Being a minnow in a large market like the ASX does present challenges for listed companies and it’s telling that all of the New Zealand companies that chose to list solely on the ASX have had poor share price performance post-IPO.”
Rachel was interviewed by NBR on this topic.