The O'Brien Column: NCM boosts listings by 19 on NZSE

Friday 8th December 2000

It was a big year for the number of new listings on the Stock Exchange.

There were 19 new floats, including those either under way or planned. The last included a New Capital Market (NCM) company, Finzsoft Solutions, whose prospectus was advertised this week, The 19 exclude overseas companies.

The introduction of the NCM in April probably boosted the number of new floats beyond what could reasonably be expected in an average year, given the less onerous requirements and the ability to float comparatively small organisation.

The first company on the NCM was Mowbray Collectables, a company specialising in auctioning and dealing in stamps, rare books and other collectable items.

Mowbray Collectables has only 2.3 million shares on issue. Other small companies listed this year include Beauty Direct and Online (28 million), Caci Group (two million), Cabletalk (2.8 million), Compass Communications (2.8 million), NZIJ (two million), Genesis Research & Development Corporation (25.2 million), National Mail (27.6 million), RetailX (two million) and Vending Technologies (29.5 million).

Most of the new listings were connected with technology and/or the internet.

Some were considered in The National Business Review last week.

It is too early to say how they will fare, given the shakeout earlier this year in technology-based stocks here and overseas and the recent drop in the technology-strong Nasdaq index in the US.

At least several in the technology group came to the market with established profit records, unlike many in the US which had little or no revenue and profit and minimal cashflow.

Even so, the share price performance of the new listings was volatile or had little change from the float price.

That showed in the range between the year's high and low. Frucor Beverages, for example, was floated at $1.50 a share. It closed at $1.87 last week but has been at $2.47, the year's high, and down to $1.45, the low.

Genesis Research & Development, a high-tech stock, moved between a high of $8.48 and a low of $6.60, after floating 5.75 million shares at $6 each.

The shares closed at $7 last week, so there was still a good margin above the offer prices.

GDC Communications' shares were issued at $1.50 and were $2.15 at the end of the first week after listing. The year's high was $5.11 and the low $1.75. GDC sold at $3.09 last week.

While some of the new companies show good margins between the offer price and the latest sale, others went south in a big way.

Beauty Direct was probably the most spectacular example, after being floated at 25c a share. The stock reached a year high of 32c and a low of 7.1c, the latter in August.

It was 9.5c last week, with the drop being a combination of market reaction to e-commerce stocks and possible doubts about the company's growth prospects, although it will take time to establish what is likely to happen in that area.

Beauty Direct, as noted in NBR on August 18, was in the difficult position of listing on March 29, 12 trading days before the Nasdaq index fell 9.67% in one day.

The New Zealand company's share price immediately fell to 15c before retreating further.

This year's 19 listings were more than three times as many as 1999's seven, of which two, Eldercare and Southern Capital, were effectively backdoor listings.

The total size of last year's listings heavily outweighed that of 2000's 19, because the former included Contact Energy and Tower as well as Calan Healthcare, Colonial First State Property Trust and Ryman Healthcare.

There would also be a considerable difference between the current total market capitalisation of last year's listings and this year's crop, even after taking account of recent overall market weakness.

Apart from the size of the listings, there were other big falls in the share prices of recent listings.

National Mail was another to get caught in the technology stock shakeout in April. As noted in August, the company operates physical mail delivery but has interests in e-business. The share price reached a high of $1.39 but slumped to a low of 49c, before recovering to last week's 60c.

The market has seen some cash issues, Fletcher Forests' exercise being the biggest. It will be interesting to see how the issue fares. It is underwritten, so the company will get the money. Full-page advertisements are still appearing in the daily press.

That is an unusual practice for a cash issue, although not unique. The spat between Fletcher Challenge and Chinese company Citic over comments about each other has not helped the process of getting individual shareholders to take up their rights.

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