German fintech Ayondo to take IPO route to SGX after RTO falls through

The SGX Centre at Shenton Way. Credit: DEALSTREETASIA

German social trading platform Ayondo AG is set to become the first overseas fintech venture to list on the Singapore Exchange (SGX) this year even as the bourse seeks to expand and strengthen its technology cluster.

Founded in 2008, Ayondo is a brokerage platform that lets users copy moves of leading traders to optimise returns. In March 2017, the public float of Frankfurt-based Ayondo on the SGX was seen as a litmus test of the city-state’s investor base. However, these plans shifted after the reverse takeover (RTO) bid from a Singapore-based property developer, Starland Holdings, fell through.

The RTO bid, initiated in June 2016 and valued at $117 million, would have placed Ayondo as the fintech listing on the SGX. The RTO would have granted Starland Holdings a majority stake in Ayondo. The company had opted for an RTO due to what it cited as volatile financial markets at the time.

However, it is now looking at an initial public offering on the SGX instead. Its chief executive, Robert Lempka, said, in an official statement, “The end of the RTO opens up the way for Ayondo to pursue an IPO instead. The preparation work for an RTO and IPO is almost identical in Singapore and therefore provision is made for a listing in early 2018.”

Ayondo has reported that its UK unit, Ayondo Markets Limited, grew its revenue by 95 per cent from $9.8 million to $19 million over the 2015-16 period and has grown its assets under management (AUM) from $19 million to $35.8 million over the same time period.

Ayondo’s sponsor is UOB Kay Hian Private Limited.

Information based on Bloomberg data as at April 2017. Credit: SGX

SGX tech push

The SGX has been engaged in initiatives to enhance its appeal to technology entrepreneurs. In 2017, it entered into a collaborative listings agreement with the international technology board NASDAQ, as well as entering into a partnership with Singapore’s IMDA.

While 2017 saw the SGX enjoy a strong rebound in its IPO pipeline and also buoyed the IPO markets of ASEAN, with a strong IPO pipeline predicted for 2018 despite the current cycle of delistings and lacklustre equities, it is also facing increased competition from bourses in Southeast Asia and the wider region. Most recently, it introduced dual-class structures for companies listing on the bourse, despite pushback from some fund managers in the city-state.

In that context, the public float of Ayondo is crucial to the Singapore bourse and could help in attracting a more diverse set of businesses to list there beyond the standard property firms, REITs and business trusts.

In a 2016 report titled “The efficiency in pricing of initial public offerings: A comparison of SG and US markets”, by economics professor author Alex Frino, research indicated that a public offering on the SGX was potentially more lucrative compared to a listing on US stock markets. The study focused on a sample of securities too small to qualify for inclusion in the S&P 500 in the US but sufficiently large to qualify for inclusion in the FTSE ST All-Share Index (FSTAS) in Singapore.

According to Frino, the SGX was a more efficient market than the US due to stock being less underpriced; underpricing is the discount on the issue price relative to the fair value required to induce investors to fully subscribe for shares in an IPO.

Empirical analysis indicated that underpricing for Singapore IPOs was 8 per cent to 12 per cent than a sample of matched IPOs in the US, meaning that Singapore’s capital markets were more efficient than the US market in pricing IPOs.

Singapore vs US underpricing. Credit: University of Wollongong, 2016

The decision by SEA Group and Razer, both companies with their roots in Singapore, to pursue listings on the NYSE and Hong Kong respectively, highlights that Southeast Asian technology enterprises prefer to reach out to the global market through a US listing, given that its investor base has a deeper understanding of technology stocks and are more willing to deploy significant capital.

By contrast, Singaporean investors prefer more stable firms that can offer strong dividends. In a May 2017 interview with this portal, Dinesh Bhatia, the founder and CEO of ASX-listed SportsHero, opined: “I commend the SGX on its efforts in re-engineering itself but it’s more about changing the mindset of retail investors dealing with the products on offer on the bourse, which is extremely challenging.”

“I think SGX needs to adopt a different strategy. They need to adopt rules and regulations for a new breed of companies. But they also need to realise that those companies will leave as the investor mentality has not changed. There needs to be a massive investor education programme. The effort has to start outside of Singapore, maybe in China and Hong Kong or by reaching out to ASEAN, by making it easy for them to invest in Singapore stocks and growing the investor base from there.”

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