Press Release

When an Australian company wants to raise money there are two ways to go about it. You can raise cash from private investors, or go public. But going public is not that easy. To list on the Australian Stock Exchange you need hundreds of shareholders and millions in capital — but there are alternatives. Australia is home to three stock exchanges. Apart from the ASX there is one in Newcastle and another in Bendigo. Ali Moore looks at Newcastle which has gone from zero to $260 million in equities in just four years.

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ALI MOORE: Once Newcastle was all about steel. Now it doesn't look the centre of a growing 'capital' market. But it is. Meet Scott Evans, he's receptionist, Chief Marketer, Business Development Manager and CEO of the Newcastle Stock Exchange. Jane Thorley helps out with settlements and disclosure issues and the trading system is outsourced to the ASX. But this pretty close to a one-man band. ALI MOORE: What would be your average number of trades? SCOTT EVANS, STOCK EXCHANGE OF NEWCASTLE: Average number of trades at the moment are three to four trades per day, each and every day. Sometimes we'll get nine or 10 trades in one day. ALI MOORE: That's for 28 companies? SCOTT EVANS: That's for 28 companies. ALI MOORE: Pretty low? SCOTT EVANS: No, not when you compare that to the average trading on ASX in terms of the types of companies that trade. ALI MOORE: By types of companies, Scott means small cap stocks. The 28 listed on the Newcastle Exchange are there for one of three reasons. They may have as few as 50 shareholders - not the up to 500 demanded by the ASX. Their net worth may be just half-a-million dollars. Not the ASX's minimum 10 million. Or they may want exemptions - like keeping a certain percentage of stock in family hands. The one thing they must have, is a nominated adviser. SCOTT EVANS: The smaller companies we look at don't necessarily have the full resources of larger companies on the ASX. Larger companies on the ASX will hire all the advisers that they need to help them with the process. We make sure that no corners are cut. ALI MOORE: For many companies, the ultimate aim is to get bigger and to get off the Newcastle Exchange and on to the ASX. SCOTT EVANS: The Holy Grail is to go on to an ASX. So they are looking to move to that way. ALI MOORE: Isn't that though, from your view, almost shooting yourselves in the foot. I mean you're actively promoting companies to leave you? SCOTT EVANS: That's right, but if you consider that we try to behave more like a boot camp for these companies. ALI MOORE: So far, Roger Coats is the only example of this part of Newcastle's business plan in action. His company, Living Cell Technologies, delisted from the Newcastle Exchange just weeks ago and the next day, started trading on the ASX. Living Cell Technologies is in the final phase of animal trials on products designed to help with the treatment of diseases such as diabetes and Huntington's. It went to the Newcastle Exchange late last year. ROGER COATS, LIVING CELL TECHNOLOGIES: ASX could have been an option but we were unprepared for the ASX, we really needed to focus on getting our systems up to date, getting the executives and directors fully aware of the continuous disclosure requirements. ALI MOORE: So it really has been a practice run for you? ROGER COATS: It's been a great stepping stone. ALI MOORE: But also for Roger, a frustrating one. ROGER COATS: I think the frustration was we had some extremely good pieces of news coming out and we saw no movement in the share price. ALI MOORE: Biotech companies like Living Cell Technologies are capital intensive and they rely on the good news to get that capital. Now, just three weeks after moving to the ASX, Roger Coats is a happy man. ROGER COATS: We issued a press release last week with some fairly mundane data and we saw a phenomenal increase in our share price only two days later. ALI MOORE: On the ASX? ROGER COATS: On the ASX. We were 22 cents and we shot up to 37 within two days. ALI MOORE: Liquidity is an issue raised by others. Just three of the 28 stocks on the Newcastle Exchange attract Broker Research, the Exchange is not well known. Indeed it only trades for two hours a day. That didn't stop its most high profile listing to date Betta Electrical, coming onboard. But it's an issue Betta is well aware of. GUY HOUGHTON, BETTA ELECTRICAL: We've only been listed now since the 23rd of August and its quite clear that because of the limited liquidity of the shares that there's a large variance in the bid and the offer price of the shares. To date that doesn't really affect us but we are watching that closely. ALI MOORE: Betta Electrical, like Living Cell Technologies, sees an eventual listing in the ASX as the Holy Grail. But the Newcastle Exchange also gets companies going in the opposite direction. HUGH ROBERTSON, RATTOON HOLDINGS: We did look at going back to ASX but hit the stumbling block of ASX not wishing to have single purpose companies listed. ALI MOORE: Hugh Robertson is on the board of Rattoon, an investment company with just one asset: an $8 million stake in the Victorian gambling giant Tattersalls. Tattersalls is Australia's biggest private business and because it's private that makes disclosure difficult for a public company like Rattoon. Hugh Robertson originally planned to back Rattoon into the shell of an old tech wreck listed on the ASX. HUGH ROBERTSON: I think the ASX is between the devil and the deep blue sea. You know, they've got to enforce the same listing rules for Newscorp as for Rattoon. There was the issue that the only investment Rattoon had was holdings in a private company, and I think that they are very conscious of those risks. ALI MOORE: And yet you were able to satisfy the disclosure requirements on the NSX, does that imply those requirements are lesser? HUGH ROBERTSON: I think they are more understanding of different types of vehicles. SCOTT EVANS: The ASX in particular, is looking at the fact Rattoon didn't have a directorship on Tattersalls and its very hard for Rattoon to get that directorship. ALI MOORE: But you were happy not to have that? SCOTT EVANS: No, we were happy not to have that because the net tangible asset report they put through and also the added investment report to us we believe is strong enough disclosure. ALI MOORE: That said, people in the business community have long memories. The Australian Stock Exchange used to run a Second Board, and it left a bad taste in the mouths of many. HUGH ROBERTSON: What Newcastle and Bendigo and the other have to do is avoid, I suppose, the spivvy element, that's what kills things and if you go back to the second board when you had stocks like "I own a racecourse" listed it didn't exactly fill the investing community with enthusiasm. ALI MOORE: Have they to date avoided the spivvy element? HUGH ROBERTSON: I think they have, yeah. It doesn't have the moniker of the ASX, but out of little acorns do mighty oak trees grow, you know, you've got to start somewhere.