WELLINGTON (Reuters) - New Zealand’s stock exchange NZX has set up a specialist team to generate new public offerings and to target overseas businesses as it faces a dearth of listings and the loss of Xero, its star player.
Investors were already fretting about the lack of new listings and weak liquidity in the Pacific nation’s exchange, when global accounting software developer Xero (XRO.NZ) announced it was abandoning the NZX (NZX.NZ) to focus on its existing Australian listing.
NZX Chief Executive Mark Petersen described Xero’s move as “disappointing” and acknowledged it gave renewed impetus to the market provider’s strategy, which it launched work on at the start of this year, to focus on luring new companies to its main board.
“We absolutely recognize that we need to put a lot of emphasis on deepening the market, making it more liquid,” Petersen told Reuters in a phone interview.
NZX set up a team to generate more IPOs from local businesses by promoting the exchange to “influencers” such as accountants and investment bankers who worked with companies.
It was also targeting overseas firms operating in New Zealand, particularly in the insurance, travel and industrial sectors, arguing that listing on the NZX reinforced customers’ awareness of the foreign company and enabled local employees to participate in company share schemes.
The NZX attracted seven new listings in 2017, and that figure dropped to just one so far in 2017, frustrating brokers and fund managers.
“It has been quite a struggle,” said Grant Williamson, director of Christchurch-based broker Hamilton Hindin Greene. “We’d love to have more options on the market to promote to our investors, for more diversification of our portfolios.”
Wellington-headquartered Xero said this month that it would quit the NZX in February as it focuses on its Australian listing.
The announcement shocked investors and prompted a round of soul-searching as to why one of the country’s biggest commercial success stories had left the local exchange, on which it generated around 3 percent of annual trade.
Xero Chief Executive Rod Drury told Reuters that the NZX was not enabling it to attract enough of the growth-focussed global investors that it wanted as it expands in overseas markets, including the United States.
“It’s kind of inevitable and healthy that exceptional companies may graduate from a small market if you have global aspirations - that’s a healthy system - but what that means is you’ve got to keep the other companies birthing,” said Drury, who served as the exchange’s director between 2009 and 2013.
Xero first listed on the NZX in 2007 and its share price has since grown more than 33-fold.
To get on major U.S. investors’ radar, Drury said Xero needed to be included in a higher-profile benchmark index.
Funneling all its trading into the ASX (ASX.AX) would likely see the firm hit the ASX 200 Index, compiled by Standard & Poors, in the first half of 2018, Drury said.
The company’s shares took an initial tumble after the de-listing was announced on Nov. 9, but have since risen 2.5 percent to NZ$33.54 ($22.80).
Reporting by Charlotte Greenfield; Editing by Eric Meijer