Catalist, New Zealand’s second licensed stock exchange is set to be launched on June 21, after it was granted a stock exchange licence by Commerce Minister David Clark last week. The new exchange is designed for small and medium-sized businesses (SMEs) that want to raise up to $20 million a year from the public.
“SMEs make up a majority of New Zealand businesses, so there’s a real need for those with growth potential to have better access to capital, and equally for investors to have better access to SME investments, to increase economic growth and job creation,” said Catalist’s founder and chief executive Colin Magee.
“Catalist’s public market means smaller businesses can now access public investment, with significantly lessened costs and administrative burdens – and without compromising investor protections” Magree, who was previously head of conduct at the Financial Markets Authority (FMA), added.
The new exchange targets SME listings with an initial value of between $6 million and $60 million and when businesses reach an appropriate size, Catalist will then assist them in transitioning to a more traditional stock exchange, such as the NZX.
Differing from the NZX which is a continuously traded market, meaning buyers and sellers can usually trade at any time while the market is open, Catalist uses regular auctions, windows in which shares of individual companies could be traded, allowing for fairer pricing and increased liquidity for financial products that don’t trade very frequently – often the case with smaller businesses.
Catalist also includes electronic settlement (with no need to issue physical share certificates, for example) as well as an in-house registry service or the ability to connect to external registries.
NZX’s small issuer option – the NZXT – which closed a couple of years ago, took a traditional continuous trading approach and failed to meet the needs of SMEs as it was too expensive for the companies due to its continuous disclosure obligations and other compliance requirements.
This continuous disclosure requirement is one of the reasons SMEs find traditional public listings unrealistic: The cost and resource required to make sure the business continuously discloses all material information can take the focus away from running the business.
Catalist, where issuers can raise up to $20 million each year from the public without falling under regulated financial product rules, will be regulated by the FMA.
SMEs play a key role in national economies around the world, so supporting them to survive and thrive is fundamental for boosting economic growth.