Chapman Tripp’s “Equity Capital Markets – trends and insights report” for 2016 anticipates a small upturn in IPO activity relative to last year, but not a return to the extraordinary levels of 2014 and 2013.
“International conditions will remain challenging for some while, which will bear on local market sentiment. However, we are aware of a number of companies considering IPOs now and more may emerge as the year progresses, assuming no further significant deterioration in the world outlook,” said Rachel Dunne, a Chapman Tripp partner specialising in corporate and securities law.
Although the New Zealand share market has experienced some of the volatility affecting overseas markets, the drop has been less sharp so far and there are reasons to suggest that this resilience may continue. The NZX 50 is coming off a healthy performance last year – up 13.6% – so is relatively well-positioned and the upcoming reporting season is expected to show strong results.
Of interest will be the extent to which the fallout from the recent receivership of Dick Smith Electronics sours retail investor attitudes toward IPO sell-downs by private equity vendors.
It will also be interesting to see whether the new NXT Market picks up pace this year. Despite having features which should appeal to SMEs, it only attracted two listings last year. A possible pipeline may be issuers which have undertaken an equity crowd funding offer, as these are likely to attract an internet-savvy investor base which is looking for a quick capital return rather than a long hold.
“Two growth areas last year which we expect to see continued are secondary capital raisings and block trades, both of which are substantially assisted by the new flexibility available under the Financial Markets Conduct Act 2013.
“A trend we saw something of last year and hope to see a lot more of this year was the use of pre-registration advertising to reach a broader range of investors – again, an opportunity created by the FMCA, and one which the Financial Markets Authority is actively encouraging to reduce the information imbalance between the retail and the institutional investor, Rachel Dunne said.
Another area of potential innovation is the burgeoning exchange traded fund market. As at the end of January this year, total funds under management by Smartshares had increased 187% year on year and we expect another increase this year given the increased focus by NZX on its Smartshares business.