Sharemarket operator NZX plans a new market with fewer disclosure obligations to attract smaller companies, eventually replacing the New Zealand Alternative Market, the NZAX.
NZX launched the alternative index in November 2003 to target small- to mid-size growth companies.
It has 18 stocks with a market cap of $NZ479.8 million ($A456.76 million) and has declined 9.8 per cent the past year, lagging an 18 per cent gain in the benchmark NZX 50 Index over the same period.
“AX didn’t work as well as we would have hoped it would do,” Aaron Jenkins, head of markets at NZX, told BusinessDesk on Tuesday.
“The short-term plan is to grow a successful new market but over time, assuming we do a good job of it, we’d expect to retire the AX.”
Rules for the new market would be more lenient to reduce costs and attract companies with a market cap from $NZ10m-$NZ100m to list.
Companies will be able to use key operating metrics to outline their business performance instead of more onerous prospective financial information requirements in their projections, and will be required to disclose information to investors periodically rather than continuously, according to draft rules released for consultation by NZX.
“The intent behind the two markets is similar in that they’re targeting growth companies,” Mr Jenkins said.
“The big difference with this market, which is intended to properly differentiate itself from the main board, is that it will reduce the obligations at IPO times and the requirement of prospective financial information, which we expect would be a significant cost reduction in terms of advisory fees.”
Wool Equities, which is de-listing from the alternative market, cited the significant cost of maintaining a share register under the listing rules as one of the reasons for its departure.
Once the new market is established, NZX would expect NZAX listed companies to migrate to the new market.