Alternative Markets – What is the NXT?

This article is taken from one I’ve done on our Equitise blog about the new alternative market (or “licensed market operator” under the FMCA) in New Zealand.

Is that another name for Netflix

No, but good try. The NXT board, targeting companies in the $10 million to $100 million market capitalisation range, was launched in June by the NZX with the listing of business mail firm G3 Group.

Ok, so what’s new?

Previously, the NZX operated only two equity markets: the NZX main board, and the NZAX alternative board. The addition, the NXT, provides a market tailored towards small, fast-growing businesses; and an avenue for those businesses to price their equity, and enter the public market.

OH, fast growing and small, I’ve got a friend like that! What makes it unique?

Right thanks, well, the NXT has a less onerous disclosure regime, which is simpler and less costly for companies and investors to comply with compared to the more rigorous continuous disclosure requirements of the NZX main board.  Strict governance rules will remain however, requiring those listed to provide quarterly performance updates, disclose important news, and publish forecasts on Key Operating Milestones, instead of the full financial forecasts of the NZX.

This sounds great, who is using it?

The market’s launch company, G3 Group, operates three businesses: a domestic business mail operation, a UK tourist mail business and document management in New Zealand. It was brought public through a compliance listing whereby no capital is raised; the existing shares are simply shifted onto the public markets.

Why didn’t these G3 guys go straight to the mainboard? 

NXT issuers need at least 50 shareholders, compared with 500 for the main board, and the minimum capital raising for an initial public offering is $5 million.  Although there are no minimum requirements for amount of capital raised in a NZX listing, there are higher listing and annual fees limiting participation to only large enterprises and established businesses.

I think I’m getting this, so what will happen to the NZAX? 

The NZAX is likely to be phased out with future listings having been ruled out. Those listed will either delist, move to the NXT or, if large enough, switch to the main board. A fivefold increase of the annual listing fee is likely to encourage those transitions.

Hey why are you telling me this?

At Equitise we believe in investor education alongside investment decisions, we want people to invest aware. Our aim is to not just provide investment opportunities, but for people to educate themselves about those opportunities.

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