Pre-IPO companies may be able to engage investors early, under new MAS proposals

SINGAPORE - Companies targeting a listing on the Singapore Exchange (SGX) may be able to engage retail investors and potential institutional investors earlier in the process, under proposals unveiled by the Monetary Authority of Singapore (MAS).

The changes, if implemented, will provide greater flexibility and scope for issuers to gauge investor interest earlier in the initial public offering (IPO) process, MAS said.

“This will support bookbuilding efforts as well as give investors more time to familiarise themselves with the issuers and their intended offers,” it added.

The proposed changes are part of a slew of proposals made by MAS and the Singapore Exchange Regulation (SGX RegCo) on May 15 that also collectively form the first set of measures put forward to boost Singapore’s equities market.

MAS is calling for views and suggestions on the proposals.

Under the current regime, a company undertaking an IPO can disseminate a prospectus, profile statement or a product highlights sheet to retail investors only after it has been registered by MAS.

This also means that engagement with retail investors can only take place after the prospectus registration.

“We have received feedback that the current publicity restrictions limit the ability of issuers to profile themselves to retail investors earlier in the IPO process,” MAS said.

MAS proposes to allow issuers to disseminate the preliminary prospectus and present material on matters in the preliminary prospectus to retail investors, including during roadshows.

As a safeguard, companies just have to state clearly that the preliminary prospectus is subject to further changes, and ensure that no offer is made on the basis of it.

They will also not be allowed to get any subscription from the retail investors that they engage with until the final prospectus is registered, MAS said.

Besides retail investors, MAS will also provide more flexibility for companies to engage institutional and accredited investors, by allowing companies to present material about the intended IPO any time before they lodge the preliminary prospectus.

“We have received feedback... that it is important for issuers to be able to conduct pre-marketing outreach to such investors earlier in the offering process to gauge market interest, especially in situations where the issuer is pursuing concurrent offerings in Singapore and another jurisdiction which allows such outreach,” MAS said.

MAS also proposes to allow companies to expand the scope of information they can provide before they register their prospectus.

Currently, companies undertaking an IPO can provide only information limited to the product they are offering, who is making the offer, and any other relevant bodies involved. With the proposed changes, companies might be able to also provide details on the anticipated timing, manner and purpose of the intended offer.

Experts said these changes will be helpful for companies undertaking IPOs to gain more visibility and encourage listings.

Financial services firm Azure Capital chief executive Terence Wong said some of the current challenges that issuers are facing are a lack of demand and getting the right valuation.

These challenges might be eased with the proposed changes.

BlackRock’s Ms Deborah Ho, the asset manager’s country head of Singapore and regional head of South-east Asia, said: “The new measures address key demand-side constraints such as low trading liquidity and inadequate institutional demand, which have hindered growth companies from listing in Singapore.”

She added that from an asset manager’s perspective, this will also foster a more active market and enhance investor participation, and create a stronger institutional shareholder base.

Deloitte South-east Asia accounting and reporting assurance leader Tay Hwee Ling said the proposed changes aim to give companies more options, pathways and avenues to tap the capital market, and to revisit what is palatable and suitable for the Singapore market.

“In particular, we foresee that these reforms will appeal to high-growth companies which have a strong local or regional presence, but are not large enough to attract sustained investor interest in a global exchange,” she said.

But should these proposed changes be implemented, companies will also have a greater responsibility to provide relevant and material information in their public documents, for investors to make informed decisions, she added.

“It is equally critical to strengthen safeguards that ensure investor protection and enable meaningful recourse where necessary,” she said.

She added: “Investors would have to be more discerning in focusing on the material information disclosed within the prospectus, quality and growth prospects of each company. The ecosystem will need to support a culture of transparency, trust, and informed engagement between issuers, investors and the market.”

Azure Capital’s Mr Wong added that under the newly proposed regime, the responsibility shifts to investors to make informed choices.

“Investors must make the effort to understand the company that they are investing in, which should always be the case.

“If the company does not disclose or misrepresent facts, investors may be affected,” he said.