"The uncertain local and global political environment and the mixed performance of a number of recent IPOs is likely to dampen investor appetite," said the report.
"A healthy M&A market, which carries lower transaction costs for vendors and greater certainty of a successful exit, is another reason likely to keep listings at a lacklustre level."
However, while Chapman Tripp's report dubbed the three listings per year a potential "new normal", industry players are less willing to make such forecasts.
"The rate of listings per year is cyclical," says Henry Chung, Head of Equity Capital Markets at FNZC.
"Yes, there were a quarter of the IPOs in 2015/2016 vs 2013/2014 but over those four years there were 27 listings (excluding ETF products) compared with seven from 2009-12.
"I'm not expecting a material uptick in 2017 but I don't think you can ever say for cyclical activities like listing numbers that there's a 'new normal'."
Brian Gaynor, Head of Investments at Milford Asset Management and columnist for the Weekend Herald, shared similar sentiments. "I hope it is not the 'new normal'. There is no sign of a quick uptick in 2017 and it is far too early to talk about 2018.
"IPO trends are cyclical and one would hope that 2018 and 2019 will be better."
Macroeconomic factors have played a role in the decline in IPO numbers.
For example, persistently low interest rates have enabled private equity firms to offer larger sums to buy companies from owners looking to exit than those owners might receive if they list publicly.
Sistema was one of these companies. Academic Colleges Group and Brew Group (formerly Bell Tea & Coffee Company) both exited for sums of over $100 million to an Australian private equity company and a Dutch beverage company respectively.
Though this may be concerning for the NZX, it is not necessarily a negative.
Sam Ricketts, Head of Investment Banking at FNZC, observes, "It can often be a good path for a company to be incubated by New Zealand private equity prior to listing."
It can often be a good path for a company to be incubated by New Zealand private equity prior to listing.
He points to NZ King Salmon in which Direct Capital first acquired a stake in 2008, and after eight years of involvement listed the company. While still in its infancy as a public company, the signs are positive with a trading price of $1.35 now a significant increase from the original listing of $1.12.
"Private equity investment in these instances assisted in maturing the company prior to listing," explains Ricketts. "It's much easier for companies to have a hiccup when it does not have continuous disclosure obligations and the associated instant market reactions to share price."
The suppressed number of listings is compounded by a number of delistings. Many of these are also the result of M&A activity and Ricketts believes that should be viewed positively too.
"Like the uptick in the listing cycle seen through 2013 to 2015, M&A is also cyclical and public market M&A activity shows that there's higher value owners in a private setting and rewards shareholders with takeover premiums," says Ricketts.
"Ultimately in takeover contexts, shareholders have the decision as to whether it proceeds -- through accepting the offer or voting on the scheme of arrangement."
However, Rachel Dunne, partner at Chapman Tripp, says a vibrant public market is important for the economy more broadly.
"It's important for the New Zealand economy to have a strong capital market so KiwiSaver funds and the like can invest in New Zealand listed companies," says Dunne.
"If there is a continued decline in the level of IPOs, investors are likely to look overseas for investment opportunities, which may create a vicious cycle as investment funds head offshore and making the NZX even less attractive to list on."
It's important for the New Zealand economy to have a strong capital market so KiwiSaver funds and the like can invest in New Zealand listed companies.
While the impact of these figures on NZX's own performance will have been offset by an increased number of debt instrument listings in 2016, the performance of their smaller markets continues to disappoint.
The NXT market, which targets companies in the $10 million to $100 million range, still contains just four companies almost two years after its launch. It's precursor for small to medium-sized companies, the NZAX, is now closed for new listings.
"It may be that New Zealand's capital markets are just too small to sustain them," says the Chapman Tripp report. "Especially given the early success in New Zealand of the equity crowdfunding model which provides smaller issuers with a way to raise capital from the public without having to list."
While Simeon Burnett, CEO of New Zealand crowdfunding platform Snowball Effect, doesn't see their operations as directly related to the struggles of the NZX, the company's growth will definitely be something to watch at the small to medium-sized end of the market.
"At this stage we don't have our own secondary market, so don't provide liquidity for investors," says Burnett. "However, for companies who wish to go through a listing process we do provide broad access to retail investors.
"We have over 12,500 in our investor audience, and have a very simple process for those who wish to invest. This eliminates barriers for the public to invest in companies, and helps increase shareholder numbers which should improve liquidity," he says.
Ultimately, observers are split on how much the NZX can and should be doing to arrest the decline in listed companies. "The main reason we have so few IPOs is that the regulations are too tough to encourage smaller companies to list -- the NZX does little to encourage companies to list," argues Gaynor.
However, Dunne says "to a certain extent, the level of IPOs will always be outside of the control of NZX (or any other stock exchange operator around the world), but there are some useful steps that NZX could take."
These steps include expanding the existing NZX50 index, creating sector-specific indices (such as a Primary Industries or Tourism index), and encouraging more ASX-listed companies to take advantage of rules which make it easy for them to dual-list on the Australian and New Zealand exchanges.
James Lee, CEO at FNZC, agrees an expansion of the NZX50 may be prudent: "Most recent IPOs have been in the small cap space and have not been large enough to make the S&P NZX50, making them more of a challenge from a fund relevance and liquidity perspective. Expanding the S&P NZX50 to 60 constituents may marginally assist small cap IPOs (less than $300m)."
