Keep it simple, investor survey tells NZX-listers
Plain-English investment documents cannot come soon enough for investors "daunted" by hefty company prospectuses.
That is one of the findings of a survey commissioned by the NZX and the Financial Markets Authority (FMA) which asked investors about the recent round of initial public offerings (IPOs) from companies listing on the stock exchange.
The survey canvassed 303 investors who had seriously considered investing in a recent IPO, including 201 who had invested in at least one.
Of those who reviewed an offer document, only 15 per cent read the document all through, while just over half said they read most of it.
Just 7 per cent of those who looked at an offer document found it very easy to understand, and 63 per cent said they found it fairly easy to understand.
Of those who considered investing but decided not to, two-thirds found the offer documents easy to understand, compared with 71 per cent of those who did invest.
"People find the documents daunting due to their size and their technical content," the survey report said.
Investors wanted the document to include a short, "user-friendly" summary written in plain English.
The Ministry of Business, Innovation and Employment will soon begin consulting on proposals for easier-to-follow disclosure statements which will be available for issuers from December.
FMA acting head of primary regulatory operations Simone Robbers said the authority was seeing significant improvements in the quality and presentation of investor information in offer documents, including for the recent Genesis Energy offer.
The new disclosure statements would be retail investor-focused documents, much shorter than the prospectus and investment statements seen in the past, she said.
"The information must be presented in a clear, concise and effective manner," she said.
NZX head of markets Aaron Jenkins said NZX supported the introduction of shorter, clearer documents for investors.
"The research is also timely because of the work under way for the upcoming launch of NZX's new growth market aimed at small and medium-sized enterprises," he said.
"A key principle of the new market is simplicity.
"NZX intends to streamline the investment process by providing simpler rules and disclosure requirements for listed businesses, which will reduce complexity for investors."
The survey found 75 per cent of respondents expressed confidence in New Zealand's financial markets, with confidence higher among those who invested in a recent IPO than those who decided against it.
The main reasons for investing in an IPO were to diversify a portfolio and to invest in a New Zealand firm.
Nearly half mentioned the likely returns, dividends or growth as a reason to invest.