Singapore: SGX, IMDA partner to facilitate IPOs for accredited ventures

A view of the SGX signage outside their office in Singapore March 2, 2017. REUTERS/Edgar Su

The Singapore Exchange (SGX) and Infocomm Media Development Authority (IMDA), the city-state’s technology and media regulator, have partnered to facilitate public listing on the Singapore bourse for IMDA-accredited technology enterprises.

IMDA, which operates an accreditation programme for Singapore-based startup ventures, will work with the SGX to reduce costs and information barriers that inhibit technology startups from pursuing an initial public offering (IPO) on the stock exchange. Its assistance includes facilitating pre-IPO funding and advice on the listing processes.

Through this collaboration, both parties aim to ease the route for technology companies into the capital markets, catalyse more high-tech IPOs and increase Singapore’s attractiveness as a venue for capital raising. It is also part of a broader move to leverage the power of technology economics.

The tech economy is the third largest amongst all global economies. Credit: Boston Consulting Group

Accreditation@IMDA (A@IMDA) programme curates and nurtures a growing portfolio of promising, innovative tech companies for high growth.

Tan Kiat How, Chief Executive at IMDA, said, “There are immense opportunities in the coming years for Singapore-based Infocomm Media (ICM) companies as economies in the region transform and digitalise.”

“The partnership between SGX and IMDA is an important step in deepening the collaboration between the technology and financial ecosystems and enables both groups to benefit from this rapid growth. It also enables promising ICM companies to tap Singapore’s capital markets to scale up to the next phase of their growth,” he adds.

A@IMDA will collaborate with SGX, IPO sponsors, law and audit firms to help lower the information barriers and costs for IMDA-accredited companies in the processes leading to IPO listing.

Also Read: Singapore bourse nears deal with regulators to augment tech startup IPOs

Long-term perspective

 

Source: SGX information derived from Bloomberg data as at April 2017

This development is meant to better prepare the accredited companies for a public listing, by embedding some of the steps required to become IPO-ready into A@IMDA’s existing accreditation processes and aligns with its move to attract listings by technology unicorns.

In the long term, this development is rooted in a recognition of technology’s centrality to economic growth at this stage, as well as a response to concerns over the performance of the SGX in recent years.

According to BCG, the composition of indices such as the Dow Jones Industrial Average (DJIA) and the S&P 500 has evolved with industrial companies displaced by technology majors like Apple, Google, and Amazon, whose stocks are valued much higher than many long-time industrial members.

The high market capitalisation of Apple Inc accounts for such a large share of the DJIA, with distortions in its quarterly earnings able to cause a significant impact on the entire index.

This collaboration will pave the way for IMDA-accredited companies to have more streamlined processes in capital raising. Additionally, SGX and A@IMDA aim to foster closer ties and information sharing between the financial and technology communities, enabling technology entrepreneurs and financiers to understand each other’s perspectives to a better degree.

The collaboration is also designed to offer high-growth ICM companies access to capital markets, allowing them to leverage the city-state’s financial ecosystem to support their growth and expansion plans. This is increasingly crucial as companies increasingly need to invest in their technology intensity.

Loh Boon Chye, CEO of the SGX, said, “Our collaboration with IMDA will foster a keener appreciation among Singapore technology firms of our capital markets as a source of funding, and offer them the potential of expanding their business into the broader region. We hope to galvanise more partners in the financial ecosystem to engage with these fast-growing, innovative companies.”

According to Loh, the last five years have seen stocks in the technology sector of the SGX record a weighted average return in excess of 50 per cent, outperforming the Straits Times Index. Year-to-date, Loh claims that the technology sector is the best performing sector, with gains of more than 30 per cent.

Also Read: Singapore: 8I Holdings to list education subsidiary on SGX Catalist

SGX’s competition

The SGX currently is unable to compete with global exchanges such as Hong Kong, Tokyo or New York or more regional competitors such as the Australian Securities Exchange (ASX) and Taipei Exchange.  According to a 2016 PwC report, it lags significantly behind its counterparts in London, New York, and Hong Kong.

Credit: PWC

The SGX-IMDA partnership will appeal to startup ventures that are younger and riskier. However, from founders’ perspective, retail investors on the Singapore bourse may not understand or see the appeal of such technology enterprises, meaning that more retail investor education is required.

Anacle Systems’ decision to list on Hong Kong’s Growth Enterprise Market (GEM) was due not only to its business operations in China but a larger investor base and the perception of a more liquid securities market.

In the SGX’s competition with regional rival Hong Kong, much of the battle pivots on China. Both are focused on becoming “Asia’s go-to centre for cross-border dealing in as many other asset classes and market segments as they can lay claim to”, with consolidation unlikely in Europe or the US due to the national interest.

Source: SGX information derived from Bloomberg data as at April 2017

For technology enterprises in Asia, bourses such as the ASX, TSE Mothers and Kosdaq are also attractive options for technology listings, with the Kosdaq targeting tech startups to drive its listings pipeline this year.

However, in the context of the Asia-Pacific, which accounted for 70 per cent of global IPOs and 48 per cent of global IPO proceeds for Q1 2017 according to an E&Y report, the SGX looks set to lead the region, followed by Thailand and the Philippines. This is driven by improving equity markets, lower volatility and ample liquidity in the market looking for investment opportunities.

Additionally, the SGX is promoting itself as a centre for business trusts and REITs – safe investment options that offer reliable dividends – and is on track with its evaluation of dual-class share structures, in a bid to make Singapore a more attractive listing venue. However, some fund managers oppose this move.

With the long-term seeing more robust entrepreneurial venture formation in the region and the emergence of many startups in Southeast Asia and the wider region, this suggests positive long-term prospects for the IPO pipeline in Southeast Asia, although technology companies may tend to continue favouring a listing in New York.

Also Read:

Singapore: HRnetGroup to conduct $124.6m listing on SGX

Singapore Exchange IPO pipeline looks strong: Mohammad Nasser Ismail, SGX

SGX is for companies with strong fundamentals, not risk: Dinesh Bhatia, SportsHero

Singapore: 8I Holdings to list education subsidiary on SGX Catalist

Adtech startup Fringe81 to list on Tokyo bourse

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.