The National Stock Exchange taps private markets to help more companies go public
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The National Stock Exchange of Australia (ASX: NSX) is looking west as it eyes an opportunity for expansion.
And to further establish its foothold in Perth, the exchange has reached out to a network of private investors.
The goal? Raise $10 million from a private placement, by issuing up to 50 million shares at 20 cents per share.
Shares in NSX closed yesterday at 17.5 cents, down from a 2019 high of 23 cents but off its mid-February low of 12.9 cents.
A smaller counterpart to the ASX, the NSX provides a market-making platform for traded securities in junior small caps.
The exchange is owned by NSX Ltd, which listed on the ASX in 2005. It hosts around 80 traded securities (compared to more than 2,000 on the ASX) which have a combined market cap of around $4.6 billion.
The placement is being led by WA-based CPS Capital Group, which has focused on a network of key players in Perth who have an interest in bringing new companies to market.
Speaking with Stockhead, Tony Cunningham from CPS said in that sense, the NSX is adopting a similar strategy to that of the ASX when it first listed in 1998.
“When the ASX demutualised it had 513 natural members and 60 companies that received shares in the newly-listed entity. And they now put a lot of their business through the ASX,” he said.
“So we’re trying to get as many of the key people in the Perth market and the junior listing market to take up that $10m. We want to get people who are going to be involved to take the stock, that’s the plan.”
NSX CEO Ann Bowering told Stockhead that the NSX’s advisors had initially suggested a significantly higher amount, based on the potential demand they’d seen in the marketplace.
“But we deemed that $10m was the right amount for the exchange at this point in time, so that’s how we arrived at the figure,” she said.
And have they got many takers? Cunningham didn’t go into specifics, but he did offer a bullish assessment. “So far it’s been heavily, heavily in demand,” he said.
The funds raised will allow the NSX to set up a Perth office with a regional manager.
Along with business development, Bowering said the NSX will deploy the capital to create increased liquidity and “continue our extensive work on operational enhancements”.
Bowering says platforms which offer a stable and liquid market for small companies are set to fill an increasingly important niche, as the ASX shifts its focus towards the big end of town.
In addition, the exchange’s push into Perth is the culmination of a three-year strategy.
“For us it’s always been a natural target market for NSX, both for listings and for investors in NSX limited,” she said.
“There’s such a high level of engagement within the equity space — so many entrepreneurs and investors who are interested in using the market to create opportunities and realise value.”
“The goal of the exchange is to provide the connectivity and infrastructure to make a market and provide a viable alternative to the ASX.”
According to Bloomberg data, there’s currently 2,233 companies listed on the ASX, and 684 are based in Perth.
That’s a weighting of more than 30 per cent, and as even a casual markets observer would note, many of those are junior mining stocks.
Cunningham says such a dynamic presents an important opportunity to potential investors.
“The ASX’s future is in the bigger listings,” he tells Stockhead. “The minimum requirement on the ASX is 300 shareholders and a $4 million raising. For the NSX, it’s 50 shareholders and a $500,000 raising.”
“So it opens up so many more opportunities for smaller companies — it’s a true venture exchange.”