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New Zealand: Old Ways Must End for Good of Market
Source: www.nzherald.co.nz
Source Date: Saturday, December 24, 2016
Focus: Institution and HR Management
Country: New Zealand
Created: Dec 26, 2016

As 2016 comes to a close there are a number of issues that continue to have an adverse impact on the country's investment markets.

These include: overpriced IPOs, NZX trading rules that favour stockbrokers over investors, the increasing use of "adjusted" or "normalised" profit figures and the director appointment process.

These are recurring themes yet little has been done to resolve them. Confidence in the NZX won't be fully restored until these issues are addressed.

The overpricing of IPOs is a major problem that erodes investor confidence in the domestic sharemarket.

The partial sale of the Crown's electricity generators went well but the performance of a large number of private sector IPOs has been poor.

These include: Wynyard (down 100 per cent from its IPO price and no longer tradingafter being placed into voluntary administration), Intueri Education (off 98 per cent), Energy Mad (96 per cent), Serko (74 per cent), SLI Systems (73 per cent), ikeGPS (65 per cent), Orion Health (64 per cent), Eroad (44 per cent), Moa (38 per cent) and Tegel (6 per cent).

However, it is important to note that a number of IPOs have performed extremely well while a third group have had positive returns but have underperformed the overall market.

IPOs are overpriced for a number of reasons including: companies are not ready to list, directors are far too optimistic and private equity promoted IPOs often have overvalued share prices.

In addition, existing controlling shareholders are incentivised to have high offer prices because this reduces the dilutionary impact of capital raisings on their shareholdings.

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