AIRA CEO Ian Matheson has had first-hand experience of the benefits of New Zealand companies listing on ASX. Earlier in his career, Matheson worked for an NZ company that de-listed from NZX and listed on ASX to aid its index inclusion and liquidity. The strategy worked.
Now, as AIRA CEO, Matheson represents investor relations (IR) professionals from ASX and NZX-listed companies. About a fifth of AIRA’s members are based in NZ, meaning Matheson has a good view of IR challenges and opportunities across both sides of the Tasman.
Annabel Cotton is one of NZ’s leading IR experts. As managing director of Merlin IR Consulting, she advises NZX and ASX-listed companies on IR, governance and equity management.
Cotton’s governance experience includes directorships on prominent NZ-listed companies and government boards. She is a director of NZX Regulation (a new board formed by NZX following the structural separation of its rule-making and commercial functions from operating activities).
Here is an extract of their comments on the pros and cons of ASX listings for NZ companies:
I don’t subscribe to the view that NZ companies must be listed on ASX to attract capital from Australian institutional investors because their investment mandate requires them to invest only in ASX-listed companies. The days of an NZX or ASX-listed company only being attractive to investors in their home market are long gone. Plenty of Australian fund managers invest in NZ-listed companies and the costs of cross-border investing are much lower.
I do believe an ASX listing for NZ companies can aid index inclusion and share liquidity. Of course, being listed on ASX is no guarantee of becoming a member of a key index in that market. But being in an index tends to increase share liquidity in a company as index funds have to hold the stock. This can support a higher valuation. If an NZ company has a secondary listing on ASX and most of its share liquidity is on NZX, it will find it harder to make ASX indices because index providers only count ASX liquidity in index inclusion.
The decision to be sole listed on NZX, dual-listed on NZX and ASX, or sole listed on ASX, depends on the nature of the company and its strategy. If an NZ company has significant local assets and is well known in that market, it might make sense for it to be only listed on NZX. If the company has significant liquidity on NZX, then plenty of Australian fund managers will be willing to buy its stock on that exchange.
However, if the NZ company has Australian assets and is known in this market, or wants to reach Australian and global investors, it makes sense to have an ASX listing as well as an NZX listing. The reality is, ASX is a much bigger window to the investment world than NZX. Some new and established NZ companies simply outgrow their home exchange.
Emerging NZ companies in biotech and IT that have a clear peer comparison with ASX-listed stocks would be mad not to list on ASX. From an investor-relations perspective, it’s important to be on an exchange where there are broking analysts and institutional investors in your company’s sector.
For emerging NZ companies, a dual or sole listing on ASX through their Initial Public Offering (IPO) makes sense for their investor relations. They’re better off reaching Australian investors from day one of their life as a listed company and establishing best-practice investor relations and Environmental, Social and Governance (ESG) policies.
I see a lot of larger NZX-listed company benchmarking themselves against best-practice governance principles in Australia, to ensure they have world-best practices in this area and are not marked down by proxy advisers.
NZ companies that sole list on ASX are missing a trick. There’s a huge mass of capital in NZ that wants to invest in higher-growth NZ companies. I’m seeing clients across a range of sectors that are benefitting from strong NZ investor demand this year for their capital raisings. Local institutional, family offices and retail investors want to support NZ companies with good growth prospects, whether they’re emerging or established.
I also don’t buy the argument that not being listed on ASX, or splitting liquidity across two exchanges through a dual listing, makes it harder to attract index investors. Merlin analyses the share registers of NZX-listed companies and we continually see the BlackRocks, Vanguards, and State Streets of this world on the share registers of NZ companies. As in other markets, the global index funds continue to increase their ownership of NZ companies.
Another issue is listing costs. It costs more to be listed on ASX each year than NZX. For an emerging NZ company that needs to raise capital to reinvest in the business, higher exchange listing fees each year are akin to money walking out the door.
Being sole listed on ASX means the NZ company is subject to different corporate governance and listing regimes, which adds further to costs. I just can’t see why an NZ company would choose to be listed only on ASX, or not have its primary listing on NZX (and a Foreign Exempt listing on ASX).
That said, a dual listing on NZX and ASX is a no-brainer for established, well-performing NZ companies. These companies potentially get the best of both worlds when their shares trade on NZX and ASX and they reach a much larger investor base and achieve higher share liquidity.
Auckland International Airport (ASX: AIA) is an example: about 71 per cent of its shares by volume and value trade on NZX and the rest on ASX. For Chorus it’s 37 per cent. For the right NZ companies, a dual listing on NZX and ASX can lead to higher overall liquidity and a larger shareholder base.
There are other investor-relations benefits from dual listings. In this age of Zoom, it’s straightforward for an Auckland-based company to meet with investors from Sydney or other markets through virtual meetings.
Also, the top NZ investment banks all have Australian desks, so, logistically from an investor-relations perspective, there’s not a lot of difference between being based in NZ or Australia. And in the old days, offshore investors could easily meet NZ and Australian companies in the one trip when they came to this region for meetings.
Although dual listings have benefits, I don’t think NZ companies should automatically assume they have to dual list on ASX. I’m surprised there aren’t any NZ companies with a dual listing on the Singapore Exchange, for example. For some NZ companies, it might make more sense to be dual-listed in Asia than in Australia. The key is that NZ companies should think about the pros and cons of different exchanges within their overall investor-relations plan.