NXT to launch for small businesses

The NXT board, targeted at companies in the $10 million to $100 million market capitalisation range, will kick off on Thursday. Photo: NZME.

NZX's new market for small, growth-focused firms - set to launch this week - won't be a big money earner for the sharemarket operator but will encourage more businesses to take the leap and go public, says head of funds management Aaron Jenkins.

The NXT board, targeted at companies in the $10 million to $100 million market capitalisation range, will kick off on Thursday with the listing of business mail firm G3 Group.

It will be a compliance listing, meaning G3 will not raise any capital through its float.

Jenkins, who led the development of the new market, said NXT would not be a "huge revenue driver" for the exchange.

"To be frank the NXT market is a business development plan for us," Jenkins said. "What we hope, however, is by introducing the NXT market you'll have companies make it to the [NZX] main board that wouldn't have made it in the absence of the NXT market."

NXT has its own disclosure regime aimed at keeping a lid on compliance costs for smaller companies.

Companies will provide interim and full-year reports, as well as quarterly updates that include progress towards "key operating milestones".

The NXT regime also includes "bright line tests" that help issuers identify what information must be immediately disclosed to the market.

These include a banking covenant breach, the appointment of a receiver or liquidator, and the likelihood of a company's operational performance varying by more than 10 per cent from published targets.

NXT firms will pay an annual listing fee of $30,000, which includes company research provided by Edison Research and "market maker" services provided by brokerage First NZ Capital.

Jenkins said First NZ would post by buy and sell prices for NXT firms on a daily basis.

This would give investors confidence that they could trade in stocks listed on the new market, he said.

NXT will eventually replace the NZAX alternative market, which launched about 10 years ago and currently has 20 issuers.

Jenkins said NZX did not have a set timeframe on how long that phasing-out process would take.

"Some [NZAX firms] will likely move up to the main board. Some will move to NXT and some will decide that public markets aren't for them because they never reached a sufficient scale."

Jenkins said the exchange had a "consistent pipeline" of potential NXT listings.

"What we don't expect to see is 50 companies to come on all at once."

NXT will have a separate website to the main NZX site and investors will have to acknowledge a "risk warning" to ensure they are aware of the different disclosure regime.

The new market will open one hour later than the main board, at 11am, and close and hour earlier at 4pm.

NXT issuers will need at least 50 shareholders, compared with 500 for the main board, and the minimum capital raising for an initial public offering is $5 million.

NXT was made possible by the Financial Markets Conduct Act, a major overhaul of securities legislation that came into force last year.