Listings on the NZX are threadbare, to say the least.
It seems not a week goes by that some business rag or another publishes another "think piece" about the dearth of listings on our bourse.
You might as well just insert the sound of crickets and be done with it.
'Wins'
Matthew Horncastle has announced Williams Corporation’s intention to list on the NZX by October 2027.
Williams Corporation develops and sells residential housing. Locate Technologies has also announced its intention to shift from being listed on the ASX to the NZX.
Locate, much like MicroStrategy, is a proponent of the “own Bitcoin and hope you trade for more than what Bitcoins are actually worth and buy more Bitcoin” (I know, it’s dumb).
For the local bourse, these are two “wins” in a rapidly shrinking market. My primary school teachers told me it’s better to show, not tell, so here are the NZX’s current upcoming listings:
Oh.
I wonder if the NZX has a new listings team and what they do all day. Watch the horse races, perhaps? Play Scrabble?
Those who follow Williams will no doubt draw parallels to another NZX-wannabe, Du Val.
Du Val is currently under statutory management, though it wasn't long ago that BusinessDesk reported "Du Val dangles NZX listing" in January 2024. How time flies!
Horncastle says that at Williams’ peak, it sold $1 million worth of property per day, or $365m per year. He says it has now “settled down” to $160m in annual revenue, which works out to about $433,000 a day.
He hopes to reach $250m in revenue by 2027.
Williams’ closest listed competitor is Chris Meehan-founded Winton Land, which reported just over $155m in revenue for FY2025.
Of that, $10.3m was net profit.
That’s a fairly meagre margin of just 6.3% which tells us that property development and sales are not an easy game. Williams does not list its profit, although we can estimate it – 5% of $160m is approximately $8m.
However, Williams has financed many of its projects via partnerships, where Williams acts as the general partner (GP) and the investors the limited partner (LP).
These partnerships include Williams Corporation Capital Partnership LP, Williams Corporation Capital and Williams Corporation First Mortgage Investments.
They often promised a 10% return on investors’ capital.
In December 2022, Williams paused six-monthly withdrawals on those funds to annual withdrawals, affecting $152.4m of investor capital.
Before that, in October 2022, Williams received a warning from the Financial Markets Authority (FMA) following concerns that the company had failed to provide disclosures to investors, primarily regarding the “wholesale investor exemption”.
'More capital'
As of today, Williams Corporation appears to have $88m under management across its various funds. Of that, $2.2m has been paid out (FY24 to-date), which is a return of 2.6% of the total invested funds.
There are many reasons a company might fund projects via a limited partnership.
It’s prudent to bring this up, as paying investors a 10% for the use of their capital may very well make the return to shareholders significantly lower. Your cost of capital at 10% on $ 155.4m is approximately $15.4m, a real expense.
Then, you need to consider your costs of materials, land, labour, etc.
In contrast, the cost of Winton’s debt is 8.66%, and it currently stands at $99.43m.
Horncastle says the company wants to list to raise more capital. He says it is to “access a wider range of lower cost debt”.
I am dubious that NZ lenders view a public listing as a means to shave a few basis points off an interest rate (see: Winton’s “cheap” but hardly “free” interest rate).
Of course, an IPO raises money by selling part of the company. If Williams sells 20% of the company at a 1x revenue multiple (ie, Horncastle’s target of $250m), it would raise $50m.
Hardly chump change, but a far cry from Winton’s initial IPO target of $350m. Unlike Winton, Williams does not have a large investment property portfolio.
Winton’s market value is in no small part dictated by its investment property portfolio.
Williams also has a property management arm, a mortgage broking arm, and a home insurance business. It is unclear how much revenue they bring in.
Mainzeal
Property construction companies have a chequered history on the NZX. Richina Pacific/Mainzeal was a strange consortium of a construction company and a leather company.
By 2013, Mainzeal was in receivership. Its liabilities hopelessly exceeded its assets.
The collapse highlighted how many of our “good and great”, such as Jenny Shipley, acted largely as rubber-stamp monkeys who didn’t appear to understand it was wrong to trade the company while it was insolvent.
Olly Newland’s Landmark Corporation collapsed in 1989, primarily as a result of the ‘87 crash.
Across the Ditch, Becton Property Group found itself in heady waters, being placed in receivership in 2013 with A$250m (NZ$283m) in debt that it could not service.
What lessons might Williams and Horncastle take from history? First: always control your debt. Don’t get too cozy with the bankers, even if they buy you a nice bottle of Mouton Rothschild, lest you find yourself sitting across from them with a tepid VB, like people down south take camping.
And what of potential investors? My advice is always to never invest in an IPO. They’re always too juiced up.
Look at the poor wallies who invested in My Food Bag. If Williams wants “cheap” debt, it will need to do capital raises. If I were you, I'd wait for that.
The other advice can be found within Winton. Since listing, Winton has created little value for shareholders. Its stock price is downright catatonic:
Finally, a word on Locate Technologies. Locate is tiny. It has a market capitalisation of just over A$17m.
It’s another dud small-cap listing for our market, presumably on the hope that Kiwis buy into the MicroStrategy-style hype. I wish the NZX would tell waste-of-time companies like this to bugger off (but hey … any listing, right?!)
Locate appears to own 12.3 bitcoins, worth approximately A$2.1m.
Given its A$17m market capitalisation, it does not appear to trade at a “MicroStrategy premium”. Even the “MicroStrategy premium” gap appears to be closing – as of writing, MicroStrategy (sorry, it’s just called Strategy now, my mistake) has a market capitalisation of US$85.2 billion (NZ$148.8b) while it holds Bitcoin worth US$71.3b.
Do with that what you will. Perhaps Locate’s “strategy” is too little, too late?