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The stage is set for a rebound of New Zealand’s equity capital markets, with much brighter years now firmly in sight, Chapman Tripp says.
The leading law firm released its annual Equity Capital Markets – trends and insights publication today, Friday 15 February.
Key insights and predictions include:
- Significant changes undertaken in 2018, including equity board consolidation, changes to fees and rules around on market trading and the new NZX Listing Rules, will have a positive flow-on effect in the next two years and beyond.
- After only one IPO in 2017, and a grand total of zero IPOs in 2018, the work that has gone on to improve the markets will translate into more IPOs in 2019 and 2020.
- The number of issuers on the NZX Main Board will decrease once again – but for the last consecutive year.
- The use of AREOs – a type of rights offer that enables the accelerated receipt of proceeds from institutional investors – will continue, particularly by larger issuers. The use of share purchase plans (SPP) will decline, in part due to the changes in the NZX Listing Rules.
Chapman Tripp partner Rachel Dunne said 2018 was, as predicted in last year's publication, a transitional year – and certainly not a banner year for IPOs.
“Last year was undoubtedly a sluggish year for New Zealand's equity capital markets, with no IPOs, a continued decline in the number of issuers on the NZX Main Board, and a reduction in the amount of secondary equity capital raised. However, it must be noted that compared to major global indices, the NZX 50 performed better, particularly in the latter part of the year – with the NZX 50 and ASX 200 both moving in the opposite direction to the dive taken by the FSTE 100 and S&P 500 in October.
“Additionally, the industry-led initiative Capital Markets 2029 – a body formed at the start of this year to assess how New Zealand's capital markets are working and provide recommendations for improvement – will be useful in taking a current snapshot and establishing where we would like to be in ten years' time.
“While there is a tendency to fixate on IPO activity as an indicator of capital market health, it's important to remember that we otherwise have well-functioning and innovative equity capital markets in New Zealand – particularly after New Zealand's securities laws were comprehensively reviewed and rewritten with the Financial Markets Conduct Act.
“With that being said, we expect far more vibrant markets in 2019 and 2020, including long-awaited increased IPO activity. Already we are off to a more promising start in 2019, with the IPO of Napier Port being pursued by the Hawke's Bay Regional Council following public consultation", added Dunne.