Following the Government’s announcements last year, regulations have been introduced which will come into effect on 12 June 2025 that will make prospective financial information (PFI) optional for initial public offers (IPOs). The preparation of PFIs were a significant part of the cost, risk and time involved in an IPO. We welcome this news as a step in the right direction to make IPOs more accessible for New Zealand businesses looking to grow and raise capital. 

The current position: An anomaly globally

Under the current rules, undertaking an IPO requires the preparation of a product disclosure statement (PDS) which sets out, amongst other things, information about an entity’s business plans, drivers of returns, risks and key financial information. The latter generally includes a requirement to prepare PFI for up to 2 years. This is typically the most expensive and time consuming part of the listing process (it can cost anywhere around $150,000 to $500,000), generally carries the highest degree of risk, and deviates from global standards. 

The change

The change represents a positive step towards improving the efficiency and effectiveness of New Zealand’s capital markets and allowing flexibility on how the future performance of a business can be portrayed in disclosure documents. The new regime gives the option to either:

• not prepare PFI, in which case the reasons why must be outlined; or

• prepare PFI in a form (e.g. table or narrative) and on the basis (whether in accordance with GAAP or not) of the issuer’s choosing for the next financial year. PFI could, for example, take the form of earnings guidance, non-GAAP metrics, GAAP metrics, or the New Zealand accounting standard (called “FRS-42”). The PFI must be accompanied by disclosure of the principal assumptions made and an explanation of the basis on which the PFI has been prepared. 

Even with this change, issuers may well need to put out some forecast information to support the valuation and offer price. To assist issuers, the Government materials on the changes referred to the Financial Markets Authority and/or NZX preparing guidance to support the regulations including clarifying when and what PFI should be disclosed. We will release a separate alert on developments in this area.

Other proposed changes in capital markets law in the second half of the year include:

• a review of product disclosure requirements for issuers of equity securities and existing listed equity issuers who wish to offer debt securities with a view of reducing costs on issuers and improving usability for investors; 
• a review of continuous disclosure liability settings for listed companies;
• liability settings for auditors and the potential introduction of capped liability; 
• size thresholds for climate related disclosures to increase them to be more in line with Australian thresholds which are higher, and a review of director liability in connection with climate statements; and
• amendments to takeovers laws based on non-contentious recommendations from the Takeovers Panel.

If you wish to discuss any matters in this article, feel free to reach out to one of our experts.

This article was co-authored by Nick Stewart, a Solicitor in our Corporate and Commercial team.