The review highlights four key factors. First, the NZAX Market is showing its value as a low-cost, efficient means for companies to raise capital for growth and expansion. Second, companies that have used the NZAX Market to raise capital from the public have experienced significant increases in the number of shares traded. Third, companies that have listed on the NZAX Market have, on average, realised an increase in market value. Finally, the list of NZX Sponsors accredited to bring companies to NZX's markets continues to grow.
Low-cost capital raising
Two NZAX listed companies, A2 Corporation Limited and Comvita Limited, have raised capital from the public since the market opened in November. Another company, Just Water International Limited, has completed an initial public offer of shares and will list on the NZAX later this month.
NZX Markets Development Manager, Geoff Brown, said the three companies' cost of raising capital was very low compared to traditional sources of funding.
“From the outset, our focus with the NZAX was to make it easier and cheaper for small to medium sized companies to raise capital from the public,” he said. “In the six months since the market opened, we've seen three companies utilising this facility and raising capital at very low costs. This proves that our initial goal has been achieved.”
Grant Young, Comvita Limited Financial Controller, said the company raised $7.5 million in its subsequent public offer of shares. This was achieved at a cost of 4.4 per cent of the money raised, a figure Young said the company was “very pleased” with.
Just Water International Limited raised $8.25 million in its initial public offer of shares, which closed on Monday. Managing Director Tony Falkenstein said the capital raising was achieved at a cost of 7.1 per cent of the total money raised.
Trading volumes increasing every month
Trading volumes on the NZAX Market have increased steadily since January 2004, when the lowest volumes since the market opened were recorded. There were 604 trades on the NZAX in May 2004 compared with 137 in January, an increase of 341 per cent.
Brown said it was “very encouraging” to see this upward trend. He also said trading volumes were especially strong for the companies that had used the new market to raise capital. For example, Comvita had experienced a significant increase in trading since its new shares entered the market on 18 May.
“During May, over 700,000 Comvita shares changed hands, with most of the trading activity occuring between 18 May and the end of the month. This compares with less than 80,000 shares traded in the entire month of April ,” he said.
“This increase is indicative of the tendency for new issues to have a very positive effect on liquidity. As such, our ongoing focus for the NZAX is on encouraging both new companies and existing listed companies to use the market to raise capital.”
Share price gains
The review also shows the companies listed on the NZAX Market have realised an average share price gain of 14.8 per cent since listing. NZX Head of Regulatory and Public Policy, Elaine Campbell, said this “clearly indicates that investors value the certainty and comfort of the NZAX Market's regulatory framework”.
NZX Sponsors open listing pipeline
Finally, the number of NZX Sponsors stands at 40, up from 28 on 31 December 2004 . The NZX Sponsor role, created to enable a greater range of professional services firms to bring companies to NZX's markets, is critical in facilitating low-cost listings and capital raisings. It also recognises the strong relationships many companies have with professional services advisors outside the traditional listing process.
NZAX MARKET STATISTICS (at 31 May 2004)
| Number of trades in May 2004: | 604 (341% increase from Jan 2004) |
| Value traded in May 2004: | $3,615,791 (502% increase from Jan 2004) |
| Total market capitalisation: | $351,454,000 |
| Number of listed issuers: | 15 |
| Number of non-standard issuers: | 3 |
| Number of NZX Sponsors: | 40 |
