Tailspin Out of the Capital MarketsFriday, May 28, 2021 - newzealandinc.com - Informed. Influential ...
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nzherald.co.nz/business Friday, May 28, 2021
Capital Markets ANALYSIS, TRENDS & INTERVIEWS
Out of the
tailspin
How the
pandemic
affected markets
Rich foreign investors spur growth
What happens when the tap’s turned off?
NZ’s Covid debt monster
Reserve Bank says ‘Goodbye’
to orthodoxy
Photo / Getty Images
B2 nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021
CAPITAL MARKETS
Wave of innovation in the wake of Covid-19
Covid-19 sent capital markets into a exacerbated. As Tim McCready writes, a fine run of IPOs. In New Zealand, Kiwi independent stance made it the toast
tailspin worldwide. they included the push to a green and retail investors — with more time on of central banks worldwide.
But it also provoked a new wave of ethical recovery; increased adoption of their hands working from home — also Independent economist Cameron
innovation in New Zealand. technology and the rise of discovered the international share Bagrie and Triple T Consulting’s Sean
The pandemic provided an unpredictable retail investors. market by investing through Keane weigh in on the recent Budget
unexpected boost to the New Zealand Michael Pollard adds the Covid companies such as Sharesies. and the management of NZ’s Covid debt
stock exchange — the NZX — as Kiwi crisis created a catalyst for general There’s more good news with monster. Andrea Fox talks with
companies tapped the market for new reflection, future-proofing and KiwiSaver changes providing a faster Fonterra’s Peter McBride about the
equity to keep balance sheets in shape transformation. But says Silvana onramp to capital markets. proposed capital restructure.
at a time when revenues were severely Schenone, consumers, employees, and At a political level, former merchant There’s more besides from players at
impacted in some sectors. investors are demanding more. banker Andrew Bayly reveals the forefront of “mum and dad”
The Herald’s 2021 Capital Markets The threatened wave of insolvencies National’s (his) thinking about capital investing; venture capital and private
report explores the future for New and liquidations did not arrive. markets. Act’s David Seymour equity. In this environment there are
Zealand capital markets at a time when Confidence — while bumpy at times — laments increasing centralisation of also new challenges for company
the rollout of global vaccines and was retained with the considerable aid Government power in market matters. directors.
sizeable US stimulus suggests an of Finance Minister Grant Robertson’s The NZ Initiative’s Oliver Hartwich Climate change disclosure is a major
optimistic future. multibillion dollar 2020 Covid Budget. says the Reserve Bank is coming full issue. And the ongoing Mainzeal case
Internationally, trends were The NZX and the ASX each secured circle from the time when its also provides lessons.
Inside Capital Markets 2021 Capital Markets 2021
Executive Editor:
Fran O'Sullivan
Writers: Bill Bennett,
Andrea Fox, Jamie Gray,
Tim McCready, Mark
Peart, Natalia Rimell,
What happens when the tap’s turned Wealthy investors finally allowed in Capital markets seek safe home Opportunity knocks for the ASX Graham Skellern
off — B5 — B7 — B11 — B13 Subeditor: Isobel
Marriner
Layouts: Isobel
Marriner
Cover: Richard Dale
Proofs: Natalia Rimell
Advertising: Tim
Wilson
nzherald.co.nz/business
National’s capital markets agenda Banking experts talk green finance Reserve Bank comes full circle What’s behind Fonterra’s capital
— B14 — B16-17 — B18 revamp — B20
nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021 B3
CAPITAL MARKETS
A Silver Lake silver lining? Peterson says the NZX has now
NZX, potential investors spurred to back NZ Inc solution for All Blacks made it simpler for companies to list
by the direct listing road.
Capital “That is a very efficient mechanism
Markets for raising capital. Of the nine com-
Fran panies that came to market last year,
O’Sullivan and the three that have come this
year, that’s been a reasonably popular
A
avenue.”
n “NZ Inc” solution to pro- Peterson acknowledges the mar-
viding the All Blacks with ket response to the Covid-19 pan-
essential capital is finding demic has played a massive role in
favour with the NZX and lifting liquidity on the NZ exchange.
potential investors alike. But he underscores there were quite
“The All Blacks are unique. They’re positive signs back in 2019 that the
one of the world’s biggest brands and NZX was starting to get more momen-
certainly one of the biggest brands in tum. “We never thought it would
sport, and incredibly important to come at us as fast as it did, but
New Zealand,” says NZX CEO Mark certainly we felt like we were on the
Peterson. right track. And actually, in the
“From an investor perspective, I New Zealand second half of last year and then
think it would see a lot of interest.” Rugby proposed when you look at the stats rolling into
The “NZ Inc” alternative to New selling 12.5 per this year, you know, we’re averaging
Zealand Rugby’s proposal to sell 12.5 cent of a new over $220 million a day. You don’t
per cent of a new commercial busi- commercial need to look too far in the rearview
ness to private equity giant Silver business to mirror to see $120 million a day.”
Lake for $387.5 million has come late private equity
in the piece. New Zealand rugby was giant Silver Lake 200 wealthy investors
hammered by Covid-19. Silver Lake for $387.5 Peterson supports the Labour Gov-
began its discussions with NZ Rugby million. ernment’s intention to open the door
even before Finance Minister Grant to some 200 wealthy foreign in-
Robertson announced financial It’s a bit innovative. But Peterson contends the Forsyth All Blacks, I think that would go well.” vestors to come to New Zealand and
assistance to New Zealand’s prime Barr team would have made pretty Having a strong brand — and strong kick the tyres on potential invest-
sporting codes in mid-May 2020. for something with a sure there was strong investor inter- investor support — was also critical ments. “They could be a very valu-
Forsyth Barr has instead proposed
a partial flotation of NZ Rugby’s com-
brand as strong as the All est before going public. “It would be
a really interesting thing just to line
when it came to stressed New Zea-
land companies seeking more capital
able piece of the puzzle,” he says.
“We’ve got to get these businesses
mercial business on the NZX. “The Blacks, I think that would the two proposals up side by side. in the wake of the Covid-19 pandemic up and strong and generally you do
feedback from our clients, from other go well. Look at the ‘pros and cons’ of each, shock which impacted heavily on that in a private capacity first.
NZX firms, from overseas, from because you know that New Zealand many businesses. “And if those folk can come in with
people in the rugby community, are Mark Peterson, NZX is really, probably going to support an Says Peterson: “As we saw in the the resources to assist with that and
all saying ‘fantastic, what can we do investment proposition around that. first half of 2020, when businesses to open up connections, that’s just
to help, we’d love to see this happen’,” Association — would see $170 million “So, from a market point of view, had performed well, they had good, going to be a good thing.”
Forsyth Barr’s managing director Neil -$190m raised by a special purpose we’ve been enthusiastic, very enthu- strong and trusted relationships with Peterson says New Zealand just
Paviour-Smith told the Herald. company which would own 5 per siastic, their shareholders. needs to make sure that all the
The Forsyth Barr proposal — cent of NZ Rugby’s commercial busi- “It’s a bit innovative. But for some- “When they needed support, the rewards don’t float offshore and some
mandated by the NZ Rugby Players ness. thing with a brand as strong as the support came.” of the rewards are captured at home.
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B4 nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021
CAPITAL MARKETS
Megatrends shaping the markets
L
iving through a global pan- Technology adoption set to
demic has seen existing continue
trends in capital markets ac-
celerated. Capital
Since the pandemic began there has been One of the most omnipresent trends
over the past year has been the leap
When considering the global
megatrends in capital markets over
Markets
Tim
a stronger focus on social responsibility, forward in the digitisation of the
economy. The lockdowns, social
the past year, few new trends have
emerged.
McCready retail investing and digital adoption distancing, and the inability to travel
and shop in traditional ways have
Many of the key trends that were acted as catalysts for the digital adop-
gaining traction prior to or during the tion by businesses and customers.
pandemic have dramatically acceler- Capital markets are no exception.
ated into 2021. The same broad trends are acceler-
Here is a look at some of the most ating a push towards digital as well
interesting ones: as a new wave of innovation at a pace
that was previously only seen in
A green and ethical recovery consumer-facing financial services.
One of the big trends remains the While most trading technology
push towards socially responsible architectures remain cumbersome, a
investing. recent report by the World Economic
This gained momentum during the Forum suggests distributed ledger
pandemic as Covid-19 highlighted technology (DLT) — of which
how connected humans and society blockchain is the most well-known
are to each other and to the world example — is reaching an inflection
around them. Many leading invest- point. They say it has the potential
ment firms now consider ESG (en- to reshape capital markets by simpli-
vironmental, social and governance) fying operations for leading players
performance important to consider and expanding access to markets for
alongside traditional financial metr- small businesses and retail investors.
ics as a fundamental way of creating The use of DLT is growing in
value and mitigating risk. acceptability, due to growing insti-
Last year, a study from Morgan tutional and regulatory comfort with
Stanley’s Institute for Sustainable the technology, the potential for cen-
Investing showed that US sustainable tral bank digital currencies in several
investment funds focused on ESG jurisdictions, and commercial dy-
factors outperformed traditional namics including cost pressures and
funds and reduced investment risk US President Joe Biden pledged to cut US greenhouse gas emissions in half by 2030. client service expectations.
during the pandemic. As an example, the UK Chancellor
Morningstar data shows global in half by 2030 — more than double month, Bill Gates-led fund Break- and those on lower wages were most Rishi Sunak last month set out pro-
sustainable fund assets grew 18 per the commitment made under the through Energy Ventures invested in impacted by the pandemic. There is posals to enhance the UK’s competi-
cent in the first quarter of 2021 2015 Paris Climate Agreement by the Ecocem Materials, an Ireland-based a growing demand to understand tive advantage in fintech — from
compared to the previous quarter to Obama Administration. He has also firm developing low-carbon cement how businesses operate, treat em- regulatory support and reforms to
almost $2 trillion, supported by strong begun rolling back some of President — a material that currently contri- ployees and customers, and whether help firms grow, to the establishment
inflows from Europe. Trump’s initiatives that side-lined ESG butes some 8 per cent of global they are engaged ethically with their of a Central Bank Digital Currency
Further bolstering this trend is the investment. carbon pollution. Investors are global supply chains. (CBDC) taskforce to coordinate the
increased attention combatting clim- This shift is bringing with it dram- expecting to see the number of at- Boards and management will be exploration of a potential UK CBDC.
ate change is being given by govern- atic change in many areas that will tractive opportunities to become increasingly required to address “If we can capture the extra-
ments around the world. Take for continue to shape investment ac- more and more frequent. questions from investors and cus- ordinary potential of technology,
instance the United States, where last tivity — with many attractive oppor- The events of last year have also tomers about social purpose, inequal- we’ll cement the UK’s position as the
month President Joe Biden pledged tunities in energy, transport, agricul- heightened the awareness of inequal- ity, diversity, pay ratios and executive world’s pre-eminent financial centre,”
to cut US greenhouse gas emissions ture, and infrastructure. Earlier this ity — women, minority populations remuneration. he said.
In more practical ways, techno-
logy adoption across the industry
Rise of unpredictable retail video game retailer GameStop Corp, saw acceptability in the industry for
investors where amateur investors worked remote and flexible working.
The past year saw a surge in amateur together to drive its stock price up Regulators have had to support
investors engaged with the stock 1500 per cent over two weeks to take this and adapt to ensure money
market. During the level four on Wall Street investors who had laundering, anti-fraud, data privacy
lockdown, for the first time ever, betted against it. This wasn’t a one- and conduct regulations continue to
amateur investors were more active off, with other stocks including be equivalent whether working from
than professional investors in New BlackBerry and Nokia targeted. the office or working from home.
Zealand. These investors are unpredictable But there are still concerns around
Services like Sharesies and Hatch and bullish and have rattled sophisti- market abuse and cybersecurity that
have created accessible platforms for cated professional investors. As a come with remote working, and
retail investors to engage in share result, the chair of the US Securities whether this trend will persevere
trading without needing to go and Exchange Commission, Gary long-term following the relaxation of
through traditional fund managers. Gensler, is considering new rules for lockdowns around the world remains
Their rapid growth in interest has apps that “gamify” trading and use to be seen.
been attributed to the pandemic visual graphics to reward an New Zealand demonstrated that
keeping people idle at home, low investor’s decision to trade. the lack of personal contact after so
interest rates limiting savings returns “The SEC must remain attuned to long working remotely, along with
and many people being shut out of rapidly-changing technologies with Zoom fatigue, saw most working in
the property market. an eye to freshening up our rules,” capital markets return to the office.
But recent months have seen says Gensler. “If we don’t address this However, the inability to entirely
another factor come into play — the now, the investing public, those wind back the new remote working
rise of social media-driven traders. saving for retirement, and education, culture has made flexible working a
Ten-year-old Jaydyn Carr made more than $3000 from GameStop shares. The most well-known example is may shoulder the burden later.” likely requirement for capital mark-
ets of the future.
Sharing Kiwi ingenuity with the world
Mark Peart Eastern country listed on Nasdaq. In sition companies) that are now driv- bal awareness, and brand power, out to a “greater universe”.
short, Israel is a powerhouse country ing many public listings. those two things are key attributes for Most NZ tech companies start off
Whether you measure a country’s for the exchange. Rocket Lab announced in Febru- listing on the American market.” with three or four people, but in time
technological prowess by its research NZ-founded company Allbirds is ary that it planned to list on the Benefits from these high-profile grow to where they are valued at $50
and development budget, percentage set to follow Rocket Lab as the second exchange with a valuation of US$4.1b listings include increased analyst million to $100m, and they are attract-
of foreign venture capital dollars, company founded by a Kiwi to line (NZ$5.7b) through a merger with a coverage of their stock performance ive buys to a larger concern.
start-ups per capita, or global market up a multibillion-dollar Nasdaq listing shell company, Vector Acquisition, and access to a larger pool of in- Dunedin-based cloud software
share in tech-heavy areas such as this year. The manufacturer of foot- set up for the purpose. vestors with large appetites for risk. firm Timely provides a cloud soft-
cyber security, Israel generally shows wear made from New Zealand mer- New Zealand, for what tradition- McIntyre says companies like Xero ware service to help businesses like
up at the top of the lists. Arrays of ino wool and recycled materials was ally is considered to be a utility-based who move to primary listings on hairdressers and beauty salons man-
innovative start-ups attract a lot of founded in 2006 by ex-All Whites market, has some exciting growth other exchanges from the NZX, do so age appointments. It’s been sold (sub-
attention. This leads to Israeli com- captain Tim Brown and Joey opportunities in the tech sector, ac- because the access to capital is ject to Overseas Investment Office
panies often merging or becoming Zwillinger, a renewables engineer cording to Craig Investment Partners greater, there’s a greater range of fund approval) to US technology firm
acquired by larger multinationals. Brown met in San Francisco, where senior adviser Peter McIntyre. managers, and consequently, a EverCommerce for more than $100m.
But some choose an international the company is now based. “It’s interesting that you talk about greater amount of investors prepared In New Zealand, McIntyre thinks
IPO, often on a large exchange. The Allbirds, which sells more than 1 Israel, because probably a decade to take risks. the mindset among some NZ tech
Nasdaq’s orientation toward tech million pairs of shoes a year, is ago, the NZX was really looking at the New Zealand companies that are companies that their payday comes
companies makes it compelling for reportedly interviewing banks ahead Israeli market with their tech-savvy listing on the Nasdaq or contemplat- once they are bought out is subtly
Israeli companies to list there. of a possible IPO, while the shoe stocks. The ASX pretty much has got ing such a move can look forward to changing, as they become more glo-
With 79 companies and a comb- company’s online sales success dur- in there as well. But Rocket Lab and analysts working with fund managers bal and inclined to become “a little
ined market capital of $US88 billion, ing the pandemic has attracted calls Allbirds have global brands and or broking houses to push out re- more world-conquering” and start
Israel represents the only Middle from SPAC (special purpose acqui- awareness, and when you have glo- search to their clients, so, again it goes listing in their own right.
nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021 B5
CAPITAL MARKETS
When the tap is turned off
Will the economy get back to normal after the Covid pandemic, or will some things be changed forever?
“Vaccination is going to be the big
leap forward in terms re-opening, and
hence economic normality.
“Immigration, for example does,
Capital not look like it’s going to return to
Markets anything like what it was pre-Covid.”
Jamie Gray He says aspects of the Tourism
industry will not return to anything
G
like pre-Covid levels.
overnments and central “But there are parts of the econ-
banks have thrown the kit- omy that are already more or less
chen sink at their econom- back to where they were — such as
ies to try and offset the the construction and housing market,
impact of Covid-19. and parts of the manufacturing sec-
Better make that the kitchen sink, tor.
the entire kitchen, and half the house. “The helicopter view is that it will
Fitch Ratings estimates that Gov- be a much more divergent, patch-
ernment debt around the world will work economy than where we were.”
continue rising, reaching a forecast What needs to happen before
US$95 trillion next year, as policy- markets can go back to normal?
makers remain focused on respond- “The big debate that is playing out
ing to the economic consequences of nearly everywhere is whether the
the Covid-19 pandemic and its after- burst of inflation we are seeing is
math. going to be more sustained or is it
It’s the kind of monetary and fiscal going to be temporary,” Jones said.
policy normally reserved for wartime “The answer to that will dictate
and, for many, it seems to have when we see conditions start to nor-
worked. malise.
Growth is back on track and infla- “We think (New Zealand) quantitat-
tion also looks to be on its way. ive easing will be wound up some
In New Zealand’s case, parts of the time in the first half of next year and
economy — particularly construction then the withdrawal of interest rate
— look to be overheating. stimulus will follow.
Miraculously, unemployment pea- “But interest rates are going to
ked just at 5.2 per cent in response remain below historical averages for
to the pandemic, a far cry from the some time,” he said.
initial double-digit projections. In the inflation debate, central
It’s been a similar story around the banks are betting that a big lift in
world; a sharp contraction, followed inflation won’t last.
by an almost equally as sharp bounce Conversely, markets are worried
back. Measures that not so long ago that inflation is going to be more
would have been unthinkable — sustained, for longer.
money printing — seem to have “We are somewhere in the middle,”
worked. Jones says.
For the moment, normality in the “Yes, the supply chain and com-
capital markets looks to be some way modity prices that we are seeing will
off. probably prove to be temporary, but
But what happens when the there is going to be a more sustained
money taps are turned off? element as well, if you think that wage
What will the inflation response to inflation must increase from here —
unparalleled levels of fiscal and mon- as we do.”
etary stimulus be?
And how long will the inevitable The inflation genie
inflation burst last. Jones said there does not appear to
These are the burning questions be any concern that that inflation
facing the capital markets. genie — which bedevilled economies
Fitch believes there are risks in in the 1970s and 80s — would be let
assuming the low current interest out of the bottle.
rate environment will be sustained “I don’t think that there is concern
indefinitely, especially if government about hyperinflation, or that things
debt continues to rise. will really run away.
“Historical episodes of govern- “If anything, the bigger concern is
ment debt reduction in developed that the burst of inflation that we are
markets are instead characterised by seeing is a bit of a false dawn, and
more mixed relationships between that we head back to very low levels
interest rates and economic growth,” if inflation that we have become used
Fitch said. to in the past five to 10 years. That’s
“More importantly, the shared ex- the higher concern.
perience of almost all debt-reduction low. At 1.25 per cent, that does give now-famous 2013 “taper tantrum” in “A lot of the drivers of that low
episodes is that governments run them downside flexibility but it’s not the US. inflation past are still around —
primary surpluses.” significant — not by any stretch.” The phrase describes the 2013 whether it be globalisation, auto-
In Fitch’s view, the future will be Croy says a return to normal trans- surge in US Treasury yields, resulting mation or low productivity growth.
much like the past in this regard, and mission for the financial markets is from the Federal Reserve’s an- “Those factors have not gone
government debt reduction will still some years away. nouncement of future tapering of its away.
eventually require fiscal adjustments. “We have got to get the cash rate policy of quantitative easing — reduc- “That’s why you still have a lot of
What does normal look like?
The big debate that back up to a level where it can
genuinely go in either direction.”
ing the amount of money it was
feeding into the economy.
people in that transitory inflation
camp.
ANZ markets strategist David Croy
says the start of a normal scenario
is playing out nearly The New Zealand Government’s
finances will be less of an issue but
The Fed’s move saw bond yields
spike higher — running counter to the
“Central banks want to be sure the
recoveries are going to be sustained
will be when the Reserve Bank, and
other central banks, stop printing
everywhere is globally, getting government books
back to something more sustainable,
their moves to keep them low — then
recovered
before they remove the punchbowl.
“The lessons of the 2013/14 taper
money via their quantitative easing
programmes.
whether the burst of with less reliance on printed money,
will be a challenge. Inflation surge widely expected
tantrum have been learned, and that’s
a good thing.
When that happens, he says mon-
etary policy will go back to relying
inflation we are “The legacy of that just can’t be left
to roll off as the bonds that they have
An inflation surge is widely expected
as the world recovers from Covid-19
“The premature whipping away of
the punchbowl is a real concern for
primarily on the official cash rate —
with plenty of room to move policy
seeing is going to be bought come due.
“That process will have to be
and supply chain constraints con-
tinue to bite.
central banks and that’s why we have
seen policymakers in the US stick to
in both directions. This could take a
while, he says.
more sustained or is managed and that can take decades
and, of course, there is always the risk
The question is how long will
higher inflation last?
the ‘patience’ line so assertively.
“If the punchbowl gets removed
“We are expecting the Reserve
Bank to start lifting rates in the second
it going to be of another crisis in the meantime.
“The amount of debt that has been
The consensus at the moment is
that it will be transitory.
because growth is accelerating and
inflation is getting back to normal,
half of next year, but for them to get
the cash rate to a point where they
temporary. built up domestically and globally has
been significant,” Croy says.
However, there is a risk that higher
levels of inflation may last longer than
then the market will be able to cope
with that.”
are comfortable that they have got ASB economist Mike Jones “It makes the whole world econ- policy makers think. Jones says the extraordinary
flexibility in both directions — per- omy much more sensitive to higher So what will it take for economies event of the last year or so is that the
haps that’s 2.0 or 2.5 per cent. interest rates.” and markets to get back to normal? monetary and fiscal medicine has
“At this point, we expect the cash ASB economist Mike Jones says in worked well.
rate to get to 1.25 per cent by the end Taper Tantrum some ways we will not get back to The events of the last year have
of 2023. When it comes to taking away the the pre-Covid days. seen unprecedented intervention.
But even 1.25 per cent, up from the monetary punchbowl, uppermost in “Certain parts of the economy will As Jones sees it, so too will be its
current 0.25 per cent, will still be very central bankers’ minds will be the remain forever changed,” he says. unwinding.
B6 nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021
CAPITAL MARKETS
‘Wave of insolvencies’ averted
They feared the worst, but insolvency experts spent more time advising directors rather than handling
liquidation applications in the wake of the Covid-19 pandemic, writes Graham Skellern
W
hen the Covid-19 lock- existing debt and they couldn’t prove
down occurred in that they were experiencing pure
March of last year, ins- Covid-related distress.
olvency practitioners “The difficulty was it was simply
braced themselves for a wave of a suspension (of debt) and businesses
receiverships and liquidations. It If we are to see an had to come back to creditors with
didn’t happened a new proposal. They had to pay
In fact, the number of insolvencies increase in insolvencies, everybody in full going forward from
for the year ending June is expected
to drop by 40 per cent both here and
then it could occur the cut-off date.
“Instead, many companies struck
in Australia, according to Michael through a downturn in individual deals with landlords and
Harper, a partner with Chapman the property market key creditors. Often landlord negotia-
Tripp specialising in finance, re- tions took a long time but ultimately
structuring and insolvency. operating in tandem with a deal was done.”
There were 228 administered Harper says the business hiber-
liquidations in New Zealand between the effects of Covid. nation scheme was pulled together
July last year and April this year Michael Harper very quickly in uncertain times and
compared with 299 for the same that was impressive. It enabled every-
period in 2019-20. one to stand still while the events
In June last year liquidator, receiv- played out.
ership or voluntary administration “The New Zealand economy boun-
appointments reached 120, bringing ced back quicker than everyone
the year’s total to 795. But the expected. Businesses have been sur-
appointments were 150 or 23 per cent prised about how well everything has
lower than in June 2019 and 188 or “At the time we spent more time and enable them to recover from the to place their existing debt on hold gone; especially how active the prop-
54 per cent lower in June 2018. advising boards and directors about impacts of Covid. for up to seven months and to have erty and equity markets have been.”
However, more businesses have the application of their duties and Inland Revenue, which puts more discussions with their creditors to Harper says the most vulnerable
been voluntarily removing them- whether they were liable for reckless companies into liquidation than any- establish whether there is a viable businesses were in retail, tourism and
selves from the Companies Register or insolvent trading if the business one else, did not chase money owing path forward. hospitality.
by choosing to pay their creditors and continued during Covid.” during last year, though it resumed The relief scheme was put in place “In terms of debt recovery, credi-
winding themselves up. Voluntary They needn’t have worried. The its debt recovery operations at the to stop vulnerable businesses from tors had to make a rational assess-
removals last year were up 32 per Business Finance Guarantee scheme, start of this year. being liquidated. ment about whether there was mar-
cent on 2019. which finishes at the end of June, The Ministry of Business, Inno- Between May and October last ket for their (debtors) assets. If there
“With the wage subsidy and other enabled small and medium busi- vation and Employment (MBIE) is year just 41 businesses had applied wasn’t, then it was better to work with
government and banks programmes, nesses to access loans of up to $5 running the Business Debt Hiber- to enter the debt hibernation scheme. the business than take formal action.”
businesses felt they could get support million for a maximum term of five nation scheme which has been ex- “Although it sounds like a good idea, During the Covid lockdowns, Aus-
somewhere during the lockdowns. years. The Government covered 80 tended to October 31 this year, but so the scheme just hasn’t been taken up,” tralia and UK switched off the reck-
The wage subsidy certainly sustained per cent of the risk and the banks far very few businesses have taken says Harper. less and insolvency laws.
a number of hospitality and retail made loans they might not normally this up. The scheme allows busi- “A lot of firms wanted to go for it,
businesses,” says Harper. authorise to vulnerable businesses nesses affected by Covid disruptions but they didn’t qualify due to pre- continued on B7
nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021 B7
CAPITAL MARKETS
Tim McCready talks to three business leaders about the Government’s wealthy investor proposals.
Anna Kominik Caroline Rainsford
Wisk’s Asia-Pacific regional director Anna Country Director for Google New Zealand,
Kominik leads a multinational team bringing Caroline Rainsford, is pleased to see the
the world’s first all-electric, self-flying air taxi Government’s announcement to support
to market. targeted, high-quality investment in New
On the government’s recent announcement Zealand.
about changes to immigration policy she says “This will lead us in a positive direction
anything that supports greater investment in toward bringing skills and new technology
New Zealand is useful. here,” she says.
“But we need to do more to amplify New Rainsford says the targeted investment,
Zealand’s capability and capacity to scale coupled with the investment of $44 million to
businesses,” she says. support small businesses through the
Kominik says we also need people, like extension of the Digital Boost Training
current and former chief technical officers and Programme announced in the Budget — which
chief operating officers — those people not just Google has pledged to support — is critical to
with the funds, but also the skills and ensure the benefits of the growing digital
experience in growing companies and taking economy are shared widely and equitably.
them global. The Government says the programme will
“We need to be really ambitious for the start- provide up to 60,000 small businesses with
ups that have been nurtured over the past digital skills training to aid in “the transition to
decade and who are ready and wanting to take future ways of working”.
on the world.” Speaking at the Auckland’s Future, Now
While the announcement came with little Summit earlier this month, Rainsford said she
detail, Kominik says rather than letting in technologies that would love to come to New has always believed in the role of digital value of $46.6 billion by 2030.
random high net worth individuals, we must Zealand right now. transformation to support Auckland’s economy “To put this in perspective, this is equivalent
identify the gaps in the New Zealand companies “They want to do due diligence, they want — but more so now than ever, and what is to about 14 per cent of New Zealand’s GDP, or
that are scaling fast and/or who need the capital to come through the border.” important is the uptake of skills. the combined GDP supported by Canterbury
most acutely along with the ability to have the She says New Zealand has the opportunity “We can have all this technology and we can and Hawke’s Bay,” it says.
biggest impact both economically and socially. to define what our vision is and attract invest in ICT infrastructure in New Zealand, but To fully capture the digital economy, the
“This is the perfect time to be focused on companies that support it to come and locate if we don’t have the digital skills and capability, report has identified three main pillars of action
building high-value jobs,” she says. “But our themselves here. we can’t realise the benefit of it.” the country could take.
Covid advantage won’t last for long and we “These are billion-dollar companies already She says whilst we are not doing a bad job This includes supporting the adoption of
need to seize it more aggressively.” that are going to create high-value jobs,” she in Auckland of embracing some of these, there technologies in key industries, digitally
Kominik says we need an overarching says. “We could take any kid who likes an is so much more opportunity. upskilling the current workforce and future
strategy for how we are planning to grow our engine, and we could turn them into an electric “Every day I get first-hand experience of talent, as well as promoting digital export
trending industries, including digital, creative, aircraft maintenance engineer — it’s a very, very seeing businesses in New Zealand that over the opportunities.
gaming, medtech, food and aerospace. high-value job right now.” last year have grappled with the impacts of Across these areas, Google says it has made
“These are industries that are growing Early last year, the NZ Government signed Covid,” she says. significant contributions in advancing New
quickly in New Zealand and have the potential a memorandum of understanding with Wisk to “I have seen companies embracing Zealand’s digital transformation journey.
to deliver high quality returns — both socially support a world-first passenger transport trial technology to reach customers digitally online This includes supporting the development
and economically. of its air taxi. both here in New Zealand and overseas. I have of digital skills through programmes like the
“It would be good to see how this scheme At the time of the announcement, Kominik seen people using AI to really sort out the Google Certification Programme, Digital
was feeding into supporting these sectors and said: “New Zealand's focus on decarbonising its impacts on supply chain during Covid — but Fluency Intensive for teachers, and its
companies to scale up and become even more economy as part of the electric transport we need to do so much more.” partnership with Spark to run workshops to
ambitious.” evolution directly aligns with Wisk's mission to A report commissioned by Google New support New Zealand businesses in using digital
At the Auckland’s Future, Now Summit held deliver safe, everyday flight for everyone Zealand that was released last month calculates tools by delivering digital skills training for small
earlier this month, Kominik told attendees that through effective, accessible and sustainable that if leveraged fully in the economy, digital and medium-sized enterprises (SMEs) at no
she is aware of companies with amazing urban air mobility solutions." technologies could create an annual economic cost.
Immigration reset: we need to move at speed
The Government has foreshadowed New Zealand,” he said. “We have also land as a significant destination for investment that stimulates either de-
opening the door to some 200 foreign created border exceptions for the investment has probably dissipated,” mand or supply of high value jobs in
investors through a reset of its immi- Innovative Partnerships Programme he says. the economy and/or investment in
gration settings. and New Zealand Trade and Enter- That said, he says the opportunity technologies and capabilities that will
The announcement, made earlier prise’s Investor Programme to enable is still significant and New Zealand enhance our global competitiveness
this month by Tourism Minister Stuart representatives from global companies continues to be an attractive destina- and the advancement of our green
Nash, was described by the govern- to come to New Zealand to conduct on- tion for international investment. economy and sustainability ambitions.
ment as a “once-in-a-generation reset” the-ground negotiations with com- “In principle I am encouraged by the Competition, IP, and confidentiality
of the immigration system. panies that they wish to invest in.” announcement. issues mean that officials will need to
As part of the announcement, Nash In making the announcement, Nash “As to whether 200 is enough — I be the decision-making authority to
— standing in for Immigration Minister said the investment through these pro- have got no idea — a heck of a lot could determine which investment interests
Kris Faafoi — said new border grammes will create highly-skilled jobs, be achieved by allowing 200 pre- are allowed to proceed, but Fyfe hopes
exemptions would allow those repre- enable the valuable transfer of know- qualified, validated investors into the they will consult with business leaders
senting high-value international invest- ledge and technology, and increase country. and academics to identify areas of
ment interests to come to New Zealand international connectivity for New Zea- “I would hope if we exhaust that focus and opportunities.
over the next 12 months to conduct due land firms as they allow us to position quota, because there is so much de- But he notes that any international
diligence and transact the sort of deals ourselves globally. mand and opportunity, the Govern- investment needs to be supported by
that will play an important role in Rob Fyfe, who has been working as Rob Fyfe ment would extend the quota.” domestic investment in education and
supporting New Zealand’s economic business liaison for the government, There is still little detail so far in the skills, and skilled migration to ensure
recovery from Covid-19. says he has been highlighting this “In the intervening period, some of announcement, but Fyfe says it is we can provide the workforce to sup-
“We want targeted, high-quality in- opportunity since July last year, and the comparative advantage that important we move at speed to get the port inbound investment and the re-
vestment that establishes frontier the announcement took longer to ar- existed in the back half of 2020 that pipeline flowing. location of high-value businesses to
firms, brings skills and technology to rive than he had hoped for. was motivating interest in New Zea- He says we should be prioritising New Zealand.
‘Wave of insolvencies’ averted in Covid crisis
continued from B6 “It’s an area of law that needs Mainzeal High Court decision, which Harper says companies are given stakeholders in businesses in more
reform. We should keep thinking used a percentage of total losses in time to pull together a restructuring vulnerable sectors such as tourism
New Zealand made an amendment, about what is being used inter- the liquidation. It would be helpful if or rehabilitation proposal and direc- and hospitality are starting to lose
albeit temporary, to Directors’ Duties nationally and whether some initia- the approach to determining dama- tors can’t be personally liable for confidence — it’s been a year and they
enabling boards to develop an tives should be introduced here,” says ges for reckless or insolvent trading debts incurred during that period. can’t keep doing this for another year.
18-month plan and pay off debts Harper. “It isn’t just about fixing an could be clarified in statute.” “It’s still relatively new law and There are some businesses reaching
within that period. That change in uncertainty in existing law but pro- Harper favours a new test intro- hasn’t been particularly tested, but it breaking point,” he says.
Directors’ Duties law remained in viding best practice mechanics in the duced in Australia. The Government does seem to be a sensible solution. “Many small businesses have debt
place till September 30 last year. restructuring and rehabilitation of there established a debtor-in-poss- It’s a simpler process than voluntary secured by mortgages over the family
“The boards and directors took a companies. ession restructuring model which administration, which is expensive. homes. The property market is sus-
lot of comfort from that amendment “We need to provide better cer- provides a safe harbour for small and “One of the things the court grap- taining those businesses which con-
— (during the Covid lockdown) they tainty on the tests applied (to direc- medium-sized companies to con- pled with in the Mainzeal case was tinue to borrow on the increasing
no longer spent a lot of time wonder- tors’ duties and liabilities) and the tinue to trade and control their busi- that the directors did not get separate value of the house, or they can sell
ing about their personal liability in method of calculating damages. In ness while trying to restructure their independent professional advice.” the house and release capital that
regards to reckless and insolvent the Mainzeal case, the Court of debts. While the number of liquidations has way.
trading,” Harper says. Appeal ruled that directors are liable An independent and professional fallen over the past year, Harper “At the moment government pol-
The Court of Appeal decision on for the value of the debt incurred restructuring adviser is appointed accepts this situation could change. icy settings are helping reduce finan-
Mainzeal and the Supreme Court rul- from the time the business should and given 20 working days to create “It’s inevitable there will be conse- cial stress. If we are to see an increase
ing for Debut Homes have, however, have ceased trading to the date of a plan for creditor approval, and quences. The insolvency impact can in insolvencies, then it could occur
created less certainty for directors insolvency,” he says. securities and guarantees cannot be lag a significant and disruptive through a downturn in the property
around reckless and insolvent “This is consistent with the ap- enforced. During that time the com- economic event such as Covid. market operating in tandem with the
trading. proach commonly used prior to the pany must continue to pay tax. “What we are seeing now is that effects of Covid.”
B8 nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021
CAPITAL MARKETS
An exchange that Kiwis
A
s New Zealand’s Stock
Exchange, Te Paehoko o
Aotearoa, we always want
Six60’s mantra of ‘Don’t Forget your Roots’ has
to be seen as the natural
home for Kiwi companies wanting to
lasting relevance for New Zealand business and
access capital to help them grow and
realise their ambitions for the future.
the NZ Stock Exchange, writes Mark Peterson
I’m also equally conscious of how
important local capital markets are in
ensuring domestic investors have
easy and ready access to the won-
derful pipeline of home-grown com-
panies.
EY’s Global IPO trends report
shows that on a long-term average
more than 90 per cent of issuers list
on their domestic stock exchanges –
with cultural and strategic fit being
key considerations, along with brand
recognition and familiarity to in-
vestors. And, often it’s just about DNA
— the essence of your business.
New Zealand has a comparatively
large base of retail investors, and over
the past year we have recorded the
most significant re-engagement with
equities as an investment class in the
past 30 years. Retail participation has
been at levels never seen before in
our sharemarket, helped by the grow-
ing popularity of online trading
platforms – Jarden Direct, Sharesies Six60 wowed
and ASB Securities – that enable easy the crowd at
and low-cost access for DIY investors. their recent
This is positive for our market, and Eden Park
spurring interest and investment in concert.
our issuers.
Keeping it Kiwi Serko’s Darrin Grafton also ex- tal stepping stone for Pushpay, help- through our public markets. reflected in the total value of capital
In presenting the Emerging Leaders pressed his passion for NZX at the ing give credibility to “the crazy Kiwis 2020 was a difficult year for many raised for the year $17.6 billion — more
Best Investor Relations Award to INFINZ Awards. In accepting the 2021 with big ideas”, giving their largest sectors of the economy, but with than 50 per cent above our
Pacific Edge’s CEO, David Darling, at Leadership Award, the CEO of Aus- customer prospects confidence from these challenges the value of having expectations for 2020.
the INFINZ event this month I tralasia's leader in corporate travel their due diligence and creating a ready access to capital has been so It’s fantastic to have been busy
couldn’t help thinking how great it is and expense solutions was thankful sense of transparency. evident for New Zealand businesses ringing the listing bell to welcome a
that Kiwis can have world-leading for the recognition of the company’s Grant Rosewarne, Managing Direc- — looking hard at their balance sheets, new cohort of companies to New
innovators like Pacific Edge right in achievements — and set out further tor and CEO of New Zealand King thinking about funding and diversi- Zealand’s Exchange — with nine in
front of them, and at their finger-tips, ambition for a business that raised Salmon says they wanted to be “… as fication of funding. 2020 and four so far in 2021, including
as an investment choice on NZX. $22 million through its IPO in 2014, Kiwi as we possibly can be”. The Covid pandemic reinforced the latest DGL Group, joining us this
Pacific Edge has jumped sharply and is now worth more than $710 “At King Salmon, we recognise we the value of an NZX listing, and the week. NZX is seen as the place to
in value over the past year to a million. Darrin said: “If you think what will only have the social licence to access to equity or debt capital that come for capital and there are a wide
market capitalisation of around $860 Serko has achieved today is great, grow if we connect well with our being listed on NZX provides. range of opportunities coming to the
million, breaking new ground with then you better get ready – because communities, if we look after our It shows New Zealanders and in- market in different ways, reflecting
the company’s innovative Cxbladder I am creating one of the best New environment, and if we operate at ternational investors are ready to the options that we've opened up.
cancer diagnostic tests. While their Zealand tech stories ever and I am world’s best practice. Via our listing back good companies.
primary market is in the US, they keeping it Kiwi right here on the NZX.” on the NZX, we’ve been able to do The total of more than $5 billion On market liquidity
have been conscious of telling their In some cases, there can be import- all of these things.” of capital raised on the secondary Since the NZX strategy reset in 2017,
story and informing local investors ant benefits in terms of credibility in market in the 90 days from the there has been an unwavering focus
about the significance of these diag- global markets or social licence at Unique opportunity beginning of April last year dwarfed on removing blockages and creating
nostic tests, and educating on how home. Over this past extraordinary year, we capital raisings in the early months a platform for growth — for NZX and
physicians adopt new technology Former Chief Executive of Push- have had a unique opportunity to following the 2008 Global Financial our markets. The introduction of new
and how the US healthcare market pay Holdings, Bruce Gordon, says demonstrate to other businesses the Crisis. This need, and the greater market participants has opened up
works. listing on the NZX was an instrumen- value of having access to capital attractiveness of equity funding, is access to a broader range of investors
A dynamic screen/digital display will be used to project relevant promotional, educational and celebratory material in the reception area.
Auckland’s ‘Te Paehoko o Aotearoa’ (NZX) is moving
Natalia Rimell environment to complement the new in the 1870s. Auckland followed next ible to employees and visitors. “In our name, we have purpose-
working paradigm wrought by the with an exchange being established The NZX told the Herald: “The fully created a sense of ownership ‘by
The company at the heart of capital Covid-19 pandemic while also in the city in the early 1870s. design is made to make visitors and and of New Zealand’ because that’s
markets in New Zealand is relocating showcasing the national stock NZX says the 946sq m space is employees feel like they are in the important to us… and we need a home
its Tāmaki Makaurau office from 21 exchanges’ history. designed as a place not just for staff epicentre of the capital markets — for NZX in Auckland that is not only
Queen St to the brand-new New Zea- NZX Chair James Miller told the to work from, but with myriad uses creating an energised and enabling highly functional and tailored for our
land Capital Markets Centre further ASM: “The New Zealand Capital in mind: hosting listing events, hybrid feeling through an immersive experi- people to work productively, but also
down the road at 45 Queen St. Markets Centre will modernise and annual meetings for issuers, investor ence.” to host and celebrate who we are with
The 85-strong team hopes to relo- reorientate our work environment presentations, enabling media and The company says “one of our our customers and our wider New
cate in August 2021 and plans a major for the new normal, but also give us digital broadcasts, and it will also biggest aspirations is to be relevant Zealand constituency.”
opening to welcome external the opportunity to showcase what have the potential to showcase the and connected to Kiwis. The Auckland office is one of four
stakeholders. NZX does — and our heritage over the business to community groups and “Our vision is ‘Helping build New across Aotearoa New Zealand with
A large NZX LED ticker will take past 150 years”. schools. Zealand’s tomorrow’,” and they say headquarters in Wellington, but they
pride of place across the exterior of The first local New Zealand stock The reception area will feature a the Māori translation of the name ‘Te say that want a “space we can truly
the building beaming onto the corner exchange was established in Dunedin dynamic screen/digital display that Paehoko o Aotearoa’ — ‘The be proud of in the heart of New
of Queen and Customs St. in 1866 with initial shares trading in will project promotional, educational exchange-place of New Zealand’ Zealand’s biggest city and economic
The idea is to revamp the working the gold mines during the gold rush and celebratory material and be vis- encapsulates this. nerve centre”.
nzherald.co.nz | The New Zealand Herald | Friday, May 28, 2021 B9
CAPITAL MARKETS
can call their own
while changes to the NZX rules and about succession planning.
fee schedules have driven on market In those conversations the role of
activity and delivered improved NZX is to listen and understand the
liquidity to the Exchange. objectives and drivers, so that we can
It is encouraging to see growth in support business in the best possible
the market across all investor way and connect them with the right
segments with the value of traded partners and advisors.
liquidity originating from retail and There is a new edge to these
institutional sources accounting for discussions post-Covid, with a
approximately 18 per cent and 82 per sharper focus on planning for major
cent respectively. Alongside the in- uncertainty and unforeseen events.
crease in value traded across the NZX, But there is also a demand for
we continue to observe a rise in on- accessing capital to assist in growth
market activity and execution while maintaining a strong sense of
through the exchange-run central home, patriotism — that “being Kiwi”
limit order book. is more important than ever, and both
The proportion of on-market investors and businesses want to do
trading, last year accounted for 62 per good for New Zealand.
cent ($33 billion) of all value traded, That’s also at the very heart of
and on-market trading has what New Zealand’s Exchange has
normalised above 60 per cent. This always been about, from our origins
greater on-market liquidity assists in the 1860s, where the Dunedin
market efficiency and price discov- Brokers’ Association had a vision for
ery and has provided price improve- a meeting point that enables equal
ment for all investors. opportunity and access for local
Increased liquidity, with a greater buyers and sellers.
number of lower value trades has Pacific Edge’s CEO, David Darling, receiving the Emerging Leaders Best Investor Relations Award from Mark Today, our listed companies con-
further benefits as price spread is Peterson at the 2021 INFINZ Awards. tinue to provide that vital life-blood,
constantly being tested — and these the avenue for New Zealanders to
benefits flow through to better price to companies that could benefit from who are significant employers of tite for capital is growth-orientated or invest and share in the success of
formation. This highlights to com- having access to capital or to owners Kiwis and collectively large contribu- opportunistic. businesses they know and trust —
panies and investors that our markets who may want to release capital for tors to the New Zealand economy. We have fantastic talent and op- productive assets that are creating
are healthy, vibrant and attractive. other purposes — either now or in the What we hear from our engage- timism here in New Zealand, people jobs and fuelling the engine-room in
future. ment with the business owners is that, doing amazing things — they come to their home country and tax jurisdic-
Strong pipeline The Capital Markets 2029 report across the board in New Zealand, talk to us at NZX when they are tion.
NZX is seen as the place to come for clearly highlighted this broader op- companies are thinking about access thinking: “How can I advance my The industry-led Capital Markets
capital, and our pipeline has never portunity for current private com- to capital — in all forms, private, public business?” Whether that’s growing 2029 report captured the importance
been stronger. This includes the panies to use the listed market to capital, debt, equity — especially in a and expanding, or selling down, we of our capital markets.
possibility of some equity listings of access capital, with an estimated world of so much uncertainty. can help them work through the That’s reflected in our vision at
significant scale — prospects that 1,200 private companies in New Zea- options. NZX to “Help build New Zealand’s
could have a positive impact on the land with annual revenues in excess Opportunity and optimism Some have always had the dream Tomorrow” — growing the New Zea-
NZX, and New Zealand’s capital of $30 million. Every day we see examples in front of having their company’s ticker on land economy, and supporting the
markets more generally. We see huge potential to continue of us that the Kiwi can-do and New Zealand’s Exchange, others have resilience and long-term success of
Our efforts continue to focus on to develop the listed market to sup- innovative spirit is alive and well in a scale that means listing makes a lot Kiwi companies as a strength for our
promoting the New Zealand market port the growth of these companies, our economy, and much of the appe- of sense — and in some cases it is country.
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