Tuesday 17th April 2018
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Unlisted Securities Exchange, the unlicensed share trading platform, is working with three potential issuers it hopes to bring to market in the coming quarter as it tries to develop a deeper pipeline this year, having retained its exemption from licensing last month.
The trading platform, operated by Wellington-based Efficient Market Services, was granted an extension to its exemption from licensing by Commerce Minister Kris Faafoi after a scheduled review. The Ministry of Business, Innovation and Employment recommended the exemption remain, saying in a briefing to the minister that "Unlisted continues to meet the original objectives of its exemption, the benefits associated with Unlisted still apply today, and the risks of the Unlisted market have not increased significantly since the exemption was granted".
Unlisted provided a cheaper avenue for small firms to raise capital and trade shares, offering investors broader opportunities and allowing for greater participation in the market, MBIE said.
The ministry said Unlisted's expansion didn't appear to be at the expense of the regulated NZX, and that attracting institutional investors or international capital to the platform would be difficult because it doesn't offer the same level of access to capital, liquidity and exposure of the larger licensed markets in the region.
"USX is confident in its position as New Zealand's only prescribed exempt financial product market and believes that business as usual under the prevailing exemption conditions will continue to see participation on its market increase to the benefit of all market participants," EMS chair Bevan Wallace said in a note. "We are currently working with three potential new issuers and expect these to come to USX over the next quarter and have a handful of others in our pipeline that we hope to secure over the balance of the year."
The unlicensed operator had sought relief from the condition requiring listing issuers provide audited financial statements on the proviso audited accounts come the following year, but was turned down with MBIE saying it was an appropriate protection for investors.
The exemption was opposed by NZX and the New Zealand Shareholders' Association given Unlisted's increase in size and the lack of adequate information for investors. MBIE disagreed with those objections, saying some of the expansion was due to Zespri Group's listing, which has restrictions on share ownership, and that there was a sufficient level of information given the unlicensed status of the platform.
Wallace said Unlisted is working to improve user experience and was investigating "options around a bespoke research offering".
Some 22.2 million shares worth $6 million went through the platform across 144 trades in February and March this year, compared to 2.7 million shares worth $6.7 million in 131 trades in December and January. As at March 31, Unlisted's market capitalisation was $2.47 billion, down from $2.71 billion as at Jan. 31.
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