Yesterday NZX Limited, the overseer of New Zealand’s only listed exchange, formally announced its anticipated new market. The new market, which will be called NXT (and pronounced ‘next’), is planning to launch later this year after the market rules have been approved by the FMA.
At present companies have the option of listing on either the NZX main board or the alternate market (NZAX); both of which require the company to keep the market up to date with a high level of continuous disclosure. The reporting obligations impose significant costs on listed companies and this has been identified as one of the main factors discouraging increased participation.
NXT is designed for small to mid-cap companies with valuations between $10 – $100 million. Companies listed on NXT would only be required to provide limited disclosure in the form of quarterly updates and the occurrence of other significant (prescribed) events. While this will mean compliance is simpler and cheaper for listed companies, it also means that there will be increased risk for investors (because they will have less information than under the current markets). Over time it is intended NXT will replace the NZAX.
This new market was primarily developed for start-up high-growth companies to gain greater access to capital. Despite this intention there is no reason why this market could not be used by a number of those in the construction industry. Many construction companies are limited in their ability to expand due to their restricted access to capital.
The expansion of construction industry looks set to continue in the near future with housing construction increasing at unprecedented levels and the Christchurch rebuild about to approach its peak. The ability of construction firms to grow during this period will be essential to retaining market position. This new market may provide a potential avenue for construction firms to raise equity funds in a cost effective manner.
There is still a lot of information to be clarified around the structure of NXT and we can expect further details to be released as they are finalised over the coming months. A new website has been launched that provides further information about NXT and can be viewed through the following link: NXT.