NZX signals days are numbered for NXT small cap experiment
NZX, New Zealand's dominant financial marketplace, is likely to consolidate its three equity markets onto a single board after its smaller cap markets failed to find support.
The Wellington-based bourse is reviewing its current equity market structure in response to feedback that it's not meeting the needs of the smallest listed companies, it said in a statement. It is mulling whether smaller companies could be subject to different requirements as part of a simplified structure that could combine the main NZSX board, the NZAX alternative market which is being phased out, and its replacement market for small caps, NXT.
For NZX, merging its equity markets is an admission that its previous attempts to develop a separate market to attract and help develop smaller fast growing companies haven't worked. Its latest attempt, the NXT market launched in June 2015, has attracted just four companies to date, and the company that first listed on it, mail operations and document management firm G3 Group, announced last week that it may delist and return to private ownership.
"The NXT Market hasn't developed as quickly or effectively as we had hoped," said NZX chief executive Mark Peterson, who oversaw its development in his earlier role as head of markets. "NZX has been speaking with the market for some time about how we can look to simplify the structure and operation of our equities markets to ensure its design meets the needs of everyone."
Peterson noted the idea for NXT came out of the Capital Markets Development Taskforce and its intent of supporting smaller listed companies remains important for the NZX. NXT offered less onerous market rules, designed to ease the cost of small-to-medium sized enterprises listing, and allowed companies to use key operating metrics rather than traditional financial information to report on their performance.
NZX's statement on the future of its markets comes ahead of its annual meeting on Friday, where shareholders will vote on whether to elect Just Water International founder Tony Falkenstein to the board. NZX's board doesn't support the election of Falkenstein, whose water company is listed on the NZAX market. Falkenstein has spoken out against the NXT market and criticised the stock market operator for becoming too bureaucratic and not doing enough to encourage new listings.
NZX said it plans to start formal consultation on the structure of its broader market and a review of its listing rules for main board issuers, in the third quarter of this year.
Its shares last traded at $1.10, and have gained 18 percent the past year.