'Someone stole my baby': The pros and cons of listing small-to-medium sized companies

Access to capital can make or break a start-up or small business’ aspirations to fly. Yet New Zealand, with its limited capital market access, presents challenges even for the most seasoned business person.

There are plenty of challenges for SMEs, but one of the most critical is capital. Capital is the oxygen supply for a young business, and there is an inevitability in the fact that many young businesses in New Zealand will have to look to larger international markets for growth.  

So how is that to be done? Phil Norman has some tips for smaller companies seeking to raise money:

1) Focus hard on the capital raising aspect of your business. Access to capital is vital as, without it, the opportunity to build an internationally scalable product will not exist, the opportunity to expand beyond New Zealand’s shores will be unachievable and the chance to become rich and famous will exist only in the founder’s mind.

Startups need to be mindful that failure to gain access to capital equates to failure to gain scalability for products in offshore markets.

2) Founders must get over the “dilution issue” and accept they will end up owning a relatively small percentage of the company if it achieves international success.

3) Don't dismiss a stock market listing. Most start-up businesses are initially funded by friends and family money. Once they reach a certain phase, high net worth individuals, angels or venture capitalists are additional sources of capital.

Listing is not for everybody but is well worth consideration if growth capital is required. In the last year of two, there has been heightened interest from many young businesses in becoming publicly listed, much of that interest being driven by the halo effect generated from Xero’s success. 

There are three routes to listing: regular initial public offer (IPO), compliance listing and a reverse listing.  Examples include:

  • Xero: regular IPO (undertaken in conjunction with a public offer of securities)
  • GeoOP: compliance listing (normally done following a pre-IPO fund raising)
  • VMob: reverse listing (business is backed into an existing listed shell company)

Here are some of my observations on the pros and cons of becoming listed as a smaller growth company.


  • Mechanism for sourcing new capital from wider audience.
  • Provides liquidity for shareholders.
  • Increased credibility and profile that may come with being a public company.
  • Can be value enhancing.


  • Costs of listing and ongoing compliance.
  • Disclosure, reporting and stakeholder communications requirements more onerous.
  • Business performance must meet market expectations (or share price will suffer).
  • Listing effort is significant.
  • Difficult to do unless the business has a credible CEO, management team and Board.
  • Company “story” must be strong.

The logical listing exchange for SMEs is NZX’s new NXT market. The Financial Markets Authority in September approved the launch of the NXT market for high growth or "momentum" stocks, expected to be ready later this year.

Phil Norman is a professional director and a principal of independent capital markets advisors CM Partners Ltd.The content was part of a speech he delivered at the Auckland Rotary Club on November 10 on the topic of small business growth challenges. 

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