A top law firm is predicting that more vibrant equity capital markets (ECM) are some way off, but that doesn’t mean lawyers and law firms specialising in the sector will face a shortage of work.
In its “Equity Capital Markets – Trends and Insights” report, Chapman Tripp forecasted that 2018 will be a transitional year to a healthier ECM sector in 2019. Last year, the NZX Main Board shrank, but there was also an increase in secondary capital raising and strong market performance.
Main board issuers fell by eight due mainly to takeovers and insolvencies. There was also only one IPO. The firm predicted that 2018 will see the NZX Main Board continue to shrink and the markets to see few IPOs. The firm correctly predicted last year’s decline in IPO activity.
However, the NZX 50 Capital index rose 20.41% on the year, outperforming the ASX 200, the S&P 500, and the FTSE 100 indices. Secondary equity capital raised totalled $3.1bn.
Chapman Tripp said that the NZX’s strategic initiatives will gain momentum in the year, which will likely boost 2019. In the meantime, lawyers can expect work in the booming side of the markets.
“While IPO activity may be sluggish, there will be no shortage of interesting work for lawyers and firms who practice in this space. Public or regulated M&A transactions effected through takeovers and schemes of arrangement are a trend we expect to continue in 2018,” Chapman Tripp partner Rachel Dunne told NZ Lawyer.
“Such transactions can be significant and require substantial input from lawyers. With secondary equity capital raisings expected to remain strong there is also scope for lawyers to contribute to innovation in the structure and processes for these transactions,” she said.
Lawyers and their firms must focus on these particular areas in the sector in the coming year, Dunne said.
“These are interesting times for our equity capital markets with the potential for significant changes in the structure and regulation of the listed issuer environment. Lawyers who practice in this area should be contributing to the shape of those changes by participating in consultation and working collaboratively with other practitioners to positively influence the new regulatory settings that will apply,” she said.
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