Regulators help kill share floats

By Duncan Bridgeman

Friday 16th May 2003

A successful listing by insurance group Promina raised hopes yesterday of more capital finally being injected into the stagnating Stock Exchange.

However, tougher regulations and weakening world markets mean the environment is still too difficult for some.

"The expectation is we are still more likely to see debt than equity product over the next six months," Forsyth Barr managing director Neil Paviour-Smith said.

"But the success of Promina combined with improving market sentiment will get people again looking at potential equity IPO [initial public offerings]," he said.

With the exception of Promina, which listed on Monday, there have been no other share floats on the New Zealand Stock Exchange this year.

The early success of the Promina float, which listed at $2.15 against a $2.03 price paid by institutions, initially raised hopes for a Stock Exchange turnaround.

But a number of companies have put off their listing plans.

Southern Capital executive chairman Graeme Wong said global conditions, coupled with tougher regulatory rules, had probably forced a rethink from many companies looking to list.

Southern Capital was planning a back-door listing for its pending acquisition of Hirequip to escape the extra cost, he said.

"Ultimately we can achieve the same thing more cheaply because we don't have to go through all the regulatory rigmarole and expense of having a new issue and IPO discount," Mr Wong said.

Companies that had earlier indicated plans to list had since been put off the idea included Tru-Test, Jade Corporation and Turners & Growers.

The only sure listing this year was the Stock Exchange itself.

The lack of confidence comes as former Stock Exchange managing director Bill Foster warned of a significant investment drain if the government invested the proceeds of its Superannuation Fund locally.

Critics say the new market rules, which impose more independent directors on listed companies along with audit committees and a director certification regime, will do nothing to increase the size of the New Zealand market or encourage more mums and dads to invest.

Mr Paviour-Smith said a spate of "stock shocks" in recent months, in which listed companies had suffered rapid declines in value, had also put any newcomers off.

The effect of announcements on share prices had acted as a health warning to investors, he said.

"At the end of the day, whatever the exchange does will not affect demand [for new listings] in the short term."

Stock Exchange chairman Simon Allen said New Zealand had outperformed the rest of the world since September 11, 2001, but the conditions were difficult.

"There is stuff in the pipeline but I think it would be fair to say that even with Promina, people are going to say, 'Gee, it's a tough market to bring something in.' And yet Promina has shown that there are investors out there who are keen to invest."

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