The NZX has recently released a guidance note on the requirements to list on the new market, NXT (click here).
This follows our previous post highlighting the potential prospect for smaller companies to raise equity through a new market designed for companies with a market cap of less than $100million (click here to read our earlier post).
The purpose of the NXT market is to provide small to mid-sized businesses with access to capital and to allow investors the ability to gain exposure to growing NZ companies. The regulator (NZX) will be required to consider the purposes when determining whether an applicant is suitable to list on NXT.
The guidance note provides an overview of the eligibility criteria to list on NXT and the process to list (or transfer from another market) on NXT. There are three main eligibility criteria which are:
- Market cap – the entity must have an expected market cap of between $10m and $100m. The rules allow companies to raise fund to meet this criteria however the minimum raised must be $5m. NZX has also indicated that companies with a market cap of less than $50m will be considered appropriate to list on NXT (as opposed to other markets).
- Spread of shareholders – there must be at least 50 shareholders who are members of the public and those shareholders must hold at least 25% of the shares in the company.
- Operational – the company must be an operating business and remain operational while it is listed on NXT
If an applicant has certain restrictions on its structure, such as defined or limited classes of shares or restrictions on voting ability, then an application may still be considered by NZX.
The process to list appears relatively straightforward, however each step will require significant planning and preparation. Companies considering this application should start consulting with their advisers at an early stage. A simplified outline of the process is as follows:
- Meet eligibility criteria (refer Schedule 1A of Guidance Note).
- Complete application (refer Schedule 1B of Guidance Note)- this must be submitted at least 20 business days prior to the proposed listing date.
- Provide information and documents required to prove eligibility criteria – these must be provided 3 business days before listing date.
A NXT advisor also needs to be engaged to review the application and business, and to provide an advisor’s declaration to NZX (part of this process will be determining KPI’s, or as NXT refers to them key operating milestones or KOM’s). The applicant will also need to enter into a pre-listing agreement as well as other formalities.
A lot of work has gone into getting this market off the ground and it is exciting to see the impact and uptake it has once it commences operation. It has the potential to apply to a number of medium sized construction companies as an alternative method to access capital.