NZX proposes new investment market for SMEs to fill the gap

NZX has floated a proposal for a new growth market (the 'New Market') that would be aimed at small to mid-sized New Zealand businesses with an expected market cap of $10-100 million. It says the market would provide New Zealand SMEs with an easier and lower cost alternative to accessing external capital - some of these businesses would be at an earlier stage of development than many investors have previously had access to.

The NZX has floated a proposal for a new growth market (the 'New Market') that would be aimed at small to mid-sized New Zealand businesses with an expected market cap of $10-100 million.

It says the market would provide New Zealand SMEs with an easier and lower cost alternative to accessing external capital - some of these businesses would be at an earlier stage of development than many investors have previously had access to.

According to the memorandum: "Many small to mid-sized New Zealand businesses are having their growth potential constrained 
by a lack of expansion capital. And many profitable, established businesses are limited in their options to address the challenges of inter-generational succession planning (exacerbated by an ageing business owner population).

"The current market mechanisms are not effectively connecting the sources and users of capital in this area. There is a gap in New Zealand’s capital markets infrastructure between smaller private markets, such as angel and venture capital, and the NZX Main Board, which is targeted at larger and more established businesses."

It's calling for input from interested parties into rules and procedures for the new market - consultation documents are up at nzx.com/market-regulation/rules-consultation.

Some key points:

* To be eligible for listing a company must have an expected market capitalisation of between $10m and $100m; a minimum capital raising of $5m prior to listing (if capital is being raised); at least 50 shareholders; and a free-float of 25 percent.

* Instead of producing a full prospectus they will produce a listing document as outlined by a New Market template. They would not need to provide prospective financial information for the IPO, but will provide projections against key operating metrics, which is designed to simplify the IPO process and reduce listing costs. They will operate in a periodic disclosure environment, giving quarterly business updates to the market.

* Investors would need to acknowledge that they understand the differences between the New Market and the other 
markets operated by NZX and have an appropriate risk profile.