I have an alternate view for stock exchanges and their important role in facilitating asset allocation in Australia.
Organised financial markets are a key prerequisite for efficient and sustainable economic development.
The statutory and market purpose of SIM VSE is to provide issuers, intermediaries and investors within the innovation meta-asset class with an attractive, efficient and well-regulated market in which to raise primary and secondary capital, and to fulfill investment and trading requirements.
However at SIM VSE we strongly encourage a return to a more traditional and nation building use of equity capital markets. The last decade has seen in my view a disproportionate emergence of the use of particular capital markets as an EXIT strategy or alternate "dumping ground" for unwanted or fully priced financial instruments including both securitized debt and equities; the fallout of which currently continue to reverberate in global markets.
Unfortunately far from encouraging new investment, these methodologies discourage very large potential pools of investors from either re-entering the market or expanding their portfolios. They actually reduce efficiency of capital market allocation and shrink the pool of retail "risk" capital stifling opportunities for new companies to access equity capital basically because the market trust is broken. The result is that the activities of this type of market effectively cannibalize long term investor interest in capital market participation and potential nation building investment for the short term gain of a few.
I am encouraging a return to first principles where a stock exchange rather than being primarily an 'exit' venue becomes a place for companies to source equity for nation building purposes; for example to facilitate expensive debt retirement, fund R&D, expand infrastructure, make new capital expenditure, engage in research, make investment in inventory, develop and prototypes, create more effective marketing and access important working capital.
Additionally I would like to see the general investing public given the opportunity within a regulated licensed marketplace to have an opportunity of earlier participation in companies with products or services that they may want to share a growth journey. Often times the public only have an opportunity to invest at the EXIT or mature growth stage of a company and have no mechanism where they can be an early investor in a product, service or market sector they are positive about.
There will still be no alternative than exercising caution in making investment decisions but I would like to at least give investors opportunity to participate in or reject an early investment in a given company.
By SIM VSE concentrating on the innovation meta-asset class we hope to achieve multiple outcomes for the sector which need not be mutually exclusive. These include early support for innovation, earlier opportunity for investors and hopefully the encouragement of a pool of investors who may reinvest whilst also giving companies the opportunity to access a potential larger pool of capital. At the same time, these companies may become more disciplined in terms of accounts, strategy and reporting and the other rigors of being a publicly listed company.
For the potential listee, SIM VSE as a regulated market can provide a stringent but fair listing process to present companies to the market in an efficient and cost effective manner.
My notion of a nation building capital market is that if we can create a vibrant equity market with an innovation centric thematic it can be a building block in progressing Australia into an emerging hub for sustainability, clean technology, renewable energy, bio science, new medicine, R&D, patent funding acting as a dynamic marketplace and an incubator driving innovation by investment in a broad range of companies within the class.
The SIM VSE vision is for a frontier country of innovation attracting thinkers, innovators, motivated entrepreneurs, foreign and domestic capital and reversing the innovation drain and setting Australia a course for 2200 that is economically sustainable and not dependent on volatile demand for commodities and tourism for jobs growth. There can be no stopping a country reinvigorated by newly created innovation jobs, cleaner energy outcomes and a more positive outlook for younger Australians. Australia can be a progressive innovation nation.
10,000 new jobs and 10 Billion in investment by 2018.
Chairman, SIM VSE