The first full year following a ‘’once in a generation’’ rewrite of capital markets law should see a healthy amount of initial public offerings (IPOs) particularly in the mid-market.
In its the latest Equity Capital Markets (ECM) trends report, the Chapman Tripp
predicted another strong year following an ‘’extraordinary’’ 2014 in which there were 16 new listings on the NZX
- the most in a single year for a decade - and $4.74bn of new capital raised. This resulted in a 4.2 percent year-on-year increase in the number of NZX-listed equity securities, and a 17.3 percent increase to NZX’s equity market capitalisation by year’s end to $96.5bn - or 42 percent of GDP.
‘’Our view is that 2015 is likely to see continued healthy IPO activity, with an emphasis on the mid-market and a potential for a number of market deals reflecting a streamlined regulatory environment for offers by listed firms,’’ the report said.
Chapman Tripp anticipated more roll-ups - the acquisition and aggregation of private companies operating in the same market - and private equity exits, as was seen in 2014.
The firm suggested companies that decided against listing last year - such as equipment rental business Hirepool and data storage company Wherescape - could opt to list this year, as well as other technology businesses.
Another trend the firm saw continuing was issuers pursuing dual ASX and NZX listings - as Genesis, Metro Glass and Orion Health did last year.
Last year’s IPOs were all conducted using either a front-end bookbuild or a soft bookbuild/fixed price structure – an approach that is expected to continue this year.
A significant milestone in this area was the implementation of the FMCA on December 1 last year. Hailed as a ‘’once in a generation’’ rewrite, the Act makes a number of changes, including replacing investment statements and prospectuses by a single offer document in a bid to make investing more accessible to non-experts.
The Act now also allows shareholders to sell down significant stakes in listed companies with the issuer’s active involvement, without the requirement for formal offer documentation. With a number of companies listed in previous years coming off escrow this year – including Wynyard Group Limited and Airwork Holdings Ltd, which were released this week– the firm expected to see more consultation between issuers and major shareholders looking to sell their holdings, and sell downs targeted at retail shareholders, as well as institutions.
The firm also expected the omission of prospective financial information in offer documents to remain uncommon, particularly after Orion Health chose not to include forecasts in 2014 on the basis that uncertain revenues due to timing of contracts made figures possibly misleading. Shortly after listing Orion announced lower than anticipated revenues in the previous quarter and the market reacted negatively as it was as if it had made forecasts and failed to meet them, the report said.