Chow Group listed but never tapped public capital

AUCKLAND: Chow Group went public in 2016 through a reverse listing with big plans to raise capital to bankroll a portfolio of accommodation and hotels but two years on it hasn’t sought funds and will go private again.

Officially the listed vehicle for businessmen John and Michael Chow objects to NZX’s proposal to abolish its smallcap market and offer all companies a slot in the main market on better terms. The brothers, who have built a property business on the back of a family takeaway in Wellington along with strip clubs and brothels, said they had ready access to private funding.

There wasn’t much opposition. The Chows held almost 90% of the company and went over that threshold last week, meaning they could force the remainder private. Minority shareholders include IRG’s Brent King, whose new job is as manager of General Finance, a nonbank lender that counts the Business Bakery’s Grant Baker and Stephen Sinclair among its shareholders and is going public via a backdoor listing.

‘‘We listed on the NZAX as it was an appropriate platform for the operations of CGL but now that NZX is moving to a single equity market and doing away with the NZAX, it’s one set of rules and costs for all,’’ chairman John Chow said in a statement. ‘‘It doesn’t make sense for CGL to remain listed.’’

The NZX is only in the second phase of its listing rules review and final decisions haven’t been made. Publicly the NZX has said the aim of the review was to reduce compliance costs and red tape. In April, NZX put out for feedback proposals to lift the minimum market capitalisation to $15 million from the current $5 million level, while lowering the free float to 20% from 25% and reducing the required number of investors to 300 from 500. Chow Group’s most recent market value is $9.9 million.

The NZAX has struggled in terms of driving demand and excitement into early stage or fledgling companies, with low liquidity and little analysis from brokerages. It had 16 issuers, including Chow Group, in April. The broader bourse is weathering an IPO drought. While total capital raised via the NZX this year is $1.5 billion, less than 1% of that has been new equity capital.

Chow’s shares last traded at 60c, valuing the company at about $9.9 million, the same price the Chows paid to lift their holding to 90.09%. The shares fell almost 8% in the past year.

Chow Group joined the NZAX in 2016 by reverse listing the shell company RIS Group. — BusinessDesk