Plans are underway for a new technology board to foster investment in Australian companies. While such talk is encouraging, many funds managers say they’ve heard it all before. STEPHEN SHORE investigates the viability of the Asia Pacific Technology Exchange.
Last month the Newcastle-based National Stock Exchange and Enterprise Pacific announced a bold joint-venture to launch a technology board in Sydney’s north. Touted as the Australian version of the Nasdaq, the Asia Pacific Technology Exchange (Aptex) will ostensibly be a new home and source of capital for local technology companies, while also playing a part in a broader plan to stimulate the “innovation economy” in Australia.
Enterprise Pacific, a not-for-profit company, was formed to create and promote the ‘Pacific Technology Corridor’, literally the cluster of technology companies running from Macquarie Park to North Sydney. According to Enterprise’s chairman, Geoff Mullins, the future of national wealth must come from intellectual capital, and it needs to be established now.
In its first few months, the Government has also emphasised the theme of “nation building”; supporting investment initiatives that contribute to Australia’s growth and development. Parliamentary secretary for early childhood education and child care, Maxine McKew, in whose electorate Aptex will be located, says the technology exchange is an example of what is needed to attract investment that will promote Australian innovation and technology.
While supportive of initiatives to boost the profile of Australia as a technology hub, many investors are sceptical about the practicality of a technology board on the NSX. Beyond the ideals, what Aptex essentially offers to technology companies is a platform that is cheaper, with less stringent listing requirements than the Australian Stock Exchange. A host of small and micro-cap managers, some of whom specialise in technology stocks, told Investment & Technology that they have no plans to look beyond the ASX, whose listing requirements they say “are not that onerous”, in the words of small cap manager Brian Eley from Eley Griffiths.
Managers say they are wary of companies that are unable to meet the ASX’s requirements. Small caps have already been hit hard by the liquidity crisis, and the appetite for “concept stocks” that draw on resources for years before delivering returns is at an all time low.
Such companies are typically the domain of venture capital. Katherine Woodthorpe, chief executive of the Australian Private Equity and Venture Capital Association (AVCAL) says that raising capital isn’t necessarily the biggest challenge that early-stage technology companies face. “Venture capital acts with a company to provide management expertise, bring experienced people onto the board, and get a company ready for public listing or a trade sale,” she says. “If a company can’t get venture capital, there is a reasonable chance it doesn’t have a strong enough business proposition. The NSX may allow smaller companies to list earlier, but some of these companies probably aren’t appropriate for capital markets.”