Innovation and change abounds for equity capital markets

Innovation and change abounds for New Zealand’s equity capital markets

30 January 2020

New Zealand’s equity capital markets are showing signs of revival, says leading law firm Chapman Tripp, in its annual New Zealand Equity Capital Markets – Trends and Insights publication, released today.

“The consolidation of NZX’s boards, changes to fees and rules around on-market trading, the new NZX Listing Rules and the formation of – and recommendations from – the industry-led body, Capital Markets 2029, drove significant change to New Zealand’s equity capital markets in 2018 and 2019,” Chapman Tripp corporate partner Rachel Dunne says.

“Despite moderate projections for markers such as IPO activity, a sure sign of NZX’s better bill of health this year was found in the banner listing, the Napier Port IPO, which we understand received strong Australian institutional investor demand in spite of opting not to dual list on the ASX. This indicates a confidence in the NZX not seen in previous years,” says Dunne.

The Napier Port IPO was a highlight for equity capital markets in 2019, which saw the Hawke’s Bay Regional Council raise $234m by effectively selling 45% of the port in order to fund the cost of a significant wharf extension.
Chapman Tripp’s insights also note a rise in popularity in alternative capital markets platforms and innovative services for smaller investors to participate in public capital markets, with Link’s ShareMeUp service recently launched and MyCap’s trading platform planned.

“Another key observation is that New Zealand companies’ attempts to engage with their investor universe are also improving. New Zealand has previously lagged in this area compared to larger and more mature markets, so this is certainly a step in the right direction. There are many benefits of this, from protecting companies against hostile takeovers, to reducing combative-style shareholder activism, which is on the rise, particularly offshore,” says Dunne.

New Zealand Oil & Gas provided a very public example of both the power of shareholder activism and the importance of takeover response strategies.
A significant development this year also was the analysis conducted by the Capital Markets 2029 taskforce, which led to a list of recommendations in various fields, from tax to education to overseas investment law.

Chapman Tripp partner and equity capital markets expert Rachel Dunne, was the only legal representative on the 10 person Capital Markets 2029 Steering Committee. She is positive about seeing some of the Committee’s recommendations progressed in 2020.

Other key predictions include:
• Improved IPO activity though still subdued due to the low interest rate environment and a strong focus on yield.
• More take-private transactions in 2020, due to the fact that a number of listed companies are trading quite significantly below NTA per security.
• More direct listings, where a company lists on the stock exchange but doesn’t raise new capital at the time of its initial listing. A recommendation in the Capital Markets 2029 report was to promote alternative pathways to listing, such direct listing.
• More environmental, social and governance (ESG) products brought to public markets.

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