OUTLOOK SUBDUED FOR NZ EQUITY CAPITAL MARKETS
16 February 2017
The drop in the number of NZX Main Board issuers experienced in 2016 seems likely to continue in 2017, says Chapman
Tripp Partner Rachel Dunne.
The decline reflects a number of factors, including delistings, often as a result of takeovers.
On the other side of the ledger, there were only three new IPOs on the NZX Main Board – Tegel, Investore Property and
New Zealand King Salmon. A number of companies chose to bypass the NZX in 2016 in favour of private sales or listing on
an overseas exchange, in particular the ASX.
We expect a similar number of IPOs this year, which is disappointing in relation both to the much stronger relative
performance of the ASX in attracting new listings over 2015 and 2016 and to NZX’s success in doing the same through 2013
and 2014.
Lead trends we have identified for 2017 in Chapman Tripp’s annual Equity Capital Markets report are:
· IPO outlook disappointingly in line with the “new normal”
· continued innovation in capital raising structures
· strong secondary capital raising volumes, and
· a continuing focus from the NZX and the Financial Markets Authority (FMA) on secondary market activities, regulatory
change and issuer inquiries.
Rumoured 2017 IPOs and listings include Hirepool, Oceania Healthcare (a perennial listing candidate), Dairy Farms NZ,
the UK’s Arria NLG and Complectus (which came close to listing in 2016 but is now tipped to pursue an M exit instead).
Former sharemarket darlings, Wynyard Group and Pumpkin Patch, hit black ice last year and are likely to be delisted this
year. Further insolvencies are also on the cards with the media reporting tough trading conditions ahead for some
issuers.
On a more positive note, we expect that the comparative strength of the New Zealand economy, the quality of our capital
markets regulatory framework and the continuing low interest rate environment will ensure that the NZX remains an
attractive investment option and that the significant secondary capital raising activity we saw last year will be
maintained.
The political uncertainty generated by the ongoing impacts of “Brexit” and the Trump Administration’s policy reset means
that we may see a preference for “front end bookbuilds” to mitigate uncertainty in IPOs, as used by New Zealand King
Salmon last year, and for the continued use of Accelerated Rights Entitlement Offers as a risk reduction mechanism in
secondary capital raisings for both the issuer and the underwriter.
We also wonder, in light of the difficulties the NZAX and now the NXT market have had in developing a strong pipeline of
new issuers, whether the NZX will conclude that the New Zealand market is simply too small to sustain these junior
boards - especially given the early success of crowdfunding, which allows companies to raise money from the public
without having to list.
Chapman Tripp’s report is attached.