Stock Exchange won't change overnight

By Peter V O'Brien

Friday 14th June 2002

Stock Exchange chief executive Mark Weldon made his mark last week, getting good media coverage for his views just four days into the job.

He was reported as saying he wanted to see more companies listed on the exchange, bigger groups and an increase in representation from the export and agricultural sectors.

Mr Weldon is apparently going to produce a strategic plan over the next three months, designed to get more companies listed, examining the exchange's products and to educate the public.

He and the exchange's staff obviously have the capacity to produce such a plan but the tests will come when it reaches the implementation phase.

The issue of attracting more and bigger companies to the exchange has been around for year but new listings have been few in recent times.

Those that did make it were usually small, particularly those coming through the New Capital Market (NCM) process (see next page). The Stock Exchange list this week had 22 companies with a market capitalisation of less than $5 million each, of which four were capitalised at less than $1 million each.

Total capitalisation of the 22 was $56.07 million, a figure that comes into perspective when it is noted 75 companies had individual capitalisations of more than $56.07 million each.

Many individual New Zealanders are "capitalised" at more than $5 million and plenty above $1 million.

Most of the non-listed companies that could be candidates for Mr Weldon's new listings' drive have probably considered such a move and rejected it.

It has been noted (NBR, May 17), that there is no sign that big family-owned organisations would seek public listing.

Apart from the possible personal kudos that could flow from running a listed company, there seems no reason for a well-funded company to join the exchange and several why they would not.

A listed company is subjected to a degree of financial disclosure not required in a non-listed, private concern and has to provide regular information in the interests of an informed market.

People involved in listed companies will get "please explain" queries from the exchange if the organisation's share price rises or falls suddenly on sizeable turnover.

They also have the market surveillance panel watching them in other ways, a situation that does not exist in operations where the owners are responsible only to each other.

Mr Weldon's desire to see more listings from the agricultural and export sectors could have some success, depending on how the exchange goes about working on potential organisations but there could be a snag.

There is still a strong vein of co-operative structure running through New Zealand agriculture and, contrary to the views of those who oppose co-operatives on economic ideology grounds, many organisations are well run and very profitable.

Any drive to get more and bigger companies on the exchange will have to be laced with a solid amount of potential benefits for participants.

It is part of Mr Weldon's job to present those benefits to targeted non-listed companies.

There is something ironic about a chief executive promoting the virtues of listing companies on the Stock Exchange when the latter has always operated as a co-operative with committee structures, although that will change when (or if) the exchange demutualises itself.

People should realise things will not change overnight in relation to the exchange's activities. Presumably Mr Weldon is also aware of that point.

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