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News analysis

Listing turf wars: Can SGX do more?

As initial public offerings (IPOs) dry up across many markets, bourse operators are prowling the globe - including here in Singapore - in search of potential listings.

Later this month, the Tokyo Stock Exchange will host a seminar to encourage Singapore companies to list there. High-quality tech companies, the flier reads, are welcome to gain direct access to the diversified investor base in Japan.

The independent, London-based NEX Exchange was in Singapore on a roadshow in February. The United States OTC Markets Group met potential issuers earlier this year as well.

The Australian Stock Exchange (ASX) regularly holds investor conferences here, while the New York Stock Exchange (NYSE) has been more active in engaging Singapore companies and their advisers in the past two years.

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From Singapore to New York, IPO activity is trailing behind the pace of delistings, and private firms are choosing to stay private longer. As the hunt heats up for cross-border IPOs, foreign exchanges are calling more often at Singapore's shores to shop for start-ups.

Mr Alex Ibrahim, who heads international listings at NYSE, told The Straits Times last month: "NYSE is extremely focused on South-east Asia. We see a market that is growing, with great companies - some of them with the size and the scope for doing IPOs. So the opportunity is absolutely there.


Singapore-based tech start-up Sea, formerly Garena, which has offices at Fusionopolis, is not alone in opting to list overseas rather than on its home turf. The online games and e-commerce firm is planning an IPO in New York. BT FILE PHOTO

"There are great companies in the technology space, shipping, consumer, that could come to the market in the near future. We've been having very strong conversations with companies not only in Singapore but throughout the region."

GREAT FIRMS, GROWING MARKET

NYSE is extremely focused on South-east Asia. We see a market that is growing, with great companies - some of them with the size and the scope for doing IPOs. So the opportunity is absolutely there.

MR ALEX IBRAHIM, NYSE's international listings head, on the region's potential.

In recent years, many Singapore-based tech firms have steered away from their home market to opt for an overseas listing - the most high-profile case being Sea, formerly Garena, which plans to list in New York.

Critics have questioned whether the Singapore Exchange (SGX) could be more aggressive in defending its turf.

HARD GOING FOR YOUNG ISSUERS

When the Sesdaq market was replaced in 2007, the new Catalist board was intended to be Singapore's answer to the London Stock Exchange's successful AIM market for growth stocks.

Catalist's sponsor-based regime, the first in Asia, was modelled after AIM's advisers model.

But in the years since, Catalist has failed to differentiate itself from the mainboard, said former "IPO king" Peter Choo.

He noted: "Under Sesdaq, the difference was quite clear. Listing there was a third to 50 per cent cheaper than listing on the mainboard at that time, and the process to get a deal through was less onerous as it considered the less resourceful nature of Sesdaq candidates. But because of the 'no embarrassment' culture ingrained now, the amount of work and expense required to get a company listed on Catalist today is almost the same as for the mainboard.

"We need a board that is recognised for high-risk companies. The current regime is not conducive for young issuers."

Although growth companies may list on Catalist without a track record of profitability, many still find the listing costs onerous - a ballpark figure would be over $1.5 million.

And SGX simply has not had many success stories to boast of.

Mr Darius Cheung, who is chief executive of privately held property portal 99.co, said: "I have the belief that investors on SGX have a lot of exposure and experience in tech, in growth companies that might not be very profitable and might ask for a very high multiple on sales. That belief is not tested. And I might not want to be the first guy out of the gate to test that."

Said chief executive Getty Goh of ASX-listed crowdfunding platform CoAssets: "In Australia, there are cases of good tech companies that did well, like iProperty, which was bought by Rupert Murdoch for A$751 million (S$772 million). Compare that with SGX."

At recent media briefings, SGX has emphasised that its real estate investment trust (Reit) and business trust sector has a market cap of $75 billion, versus $80 billion for the technology, media and telecommunications sector.

"We do have tech - we just happen to think of them as old tech, not disruptive tech," Mr Chew Sutat, who heads equities and fixed income at SGX, told reporters last week.

SGX said last week it would start courting government-accredited tech start-ups earlier on in their IPO journeys. It is also reviewing feedback on a listing framework for dual-class shares.

But more can be done, observers say. A little-known fact is that a fair number of Indian start-ups, including e-commerce giant Flipkart, have registered their businesses here.

Given that these companies are already meeting investors and holding board meetings here, one could argue that it would not be much of a stretch for them to host annual shareholder meetings here as well.

Meanwhile, foreign players won't be easing off any time soon.

Mr Bob McCooey, who is chairman for the Asia-Pacific at Nasdaq, has visited Singapore twice so far this year.

He said: "Throughout South-east Asia, there is a much higher level of activity today than we saw just a year or two ago, and we think this is the beginning of a wave of IPOs that will come out of Singapore and the region for several years.

"That's why we are spending more time in Singapore as well as throughout the rest of South-east Asia."

A version of this article appeared in the print edition of The Straits Times on June 05, 2017, with the headline 'Listing turf wars: Can SGX do more?'. Print Edition | Subscribe