IPO first-timers vs ex-listcos eyeing second bite of cherry: Let’s prioritise the former

JUST earlier this month, Temasek-backed investment firm 65 Equity Partners said it had invested S$100 million into precision manufacturer Hi-P International as a prelude for an eventual listing, most likely on the Singapore Exchange (SGX).

This is good news given the dearth of meaningful initial public offering (IPO) candidates locally. Hi-P is well-known in the technology sector and one of the largest players in Singapore.

The money will come from the Local Enterprise Fund, 65 Equity Partners’ joint S$1-billion-fund with the Singapore government to develop local companies into regional players.

But Hi-P was already previously listed on SGX, with founder Yao Hsiao Tung having made an offer to take the company private back in December 2020, with an offer of S$2 per share, valuing the company at $1.6 billion.

Not even four years down the road, it looks as if Hi-P may be gearing up for a return.

This is not the only former SGX-listed company 65 Equity Partners has invested in. Cityneon received S$150 million from the fund manager’s Anchor Fund@65 in October 2022.

The fund’s mission is to support promising high-growth enterprises and market leaders in their public fundraising in Singapore’s public equity market, whether through primary, secondary or dual listings, as well as provide pre-IPO financing to catalyse the growth of target enterprises and support them in their journey towards an eventual public listing.

Like Hi-P, exhibition provider Cityneon had earlier delisted in February 2019. Then chairman Ron Tan and a Hong Kong investor had made a privatisation offer of S$1.30 per share.

After having listed and delisted from SGX, it does seem puzzling that both companies may be returning to the same bourse they have spurned, and after a gap of only several years.

Hi-P founder Yao has spoken about a possible dual-listing in Hong Kong or the US previously. But given 65 Equity Partners’ background, an SGX listing is more likely than not.

There are many reasons why a company delists or becomes private, such as having no need to raise money from capital markets or even wanting to save money on listing costs. For both Hi-P and Cityneon, greater control and management flexibility were cited as the main reasons for delisting.

Getting two bites of the cherry?

Now, this raises a question as to whether these companies are getting “subsidised” on their second try with an SGX listing. It could be argued that these majority shareholders are getting two bites of the cherry, first when listing and raising money from investors, then taking the company private when market conditions are in their favour.

Market conditions at SGX have not significantly changed since the last time either Hi-P or Cityneon was listed, when companies complained about a lack of liquidity and investors had a preference for yield and dividend stocks. These factors still hold true.

This begs the question – should 65 Equity Partners be giving the IPO chance to other candidates?

It seems like there isn’t a shortage of companies looking to IPO, evidenced by how five Singapore-based companies have listed in the US in the first half of 2024. In fact, three of these companies have seen their stock prices weaken since listing, and the track record of those who listed before 2024 hasn’t been stellar either.

There are a number of potential IPO companies that chose other listing venues over SGX, including biotech startup Mirxes, which filed for a Hong Kong listing in July 2023. The Singapore-based company had obtained a higher valuation from bankers, and the co-founder had noted the maturity of the Hong Kong ecosystem for biotech listings.

To be fair, there are also strong, first-time candidates within 65 Equity Partners’ stable. For example, there is Malaysian used car platform Carsome. Since the Anchor fund participated in the startup’s Series E US$290 million round in January 2022, Carsome looks like it can be persuaded to list on the SGX.

But the mandate to list in Singapore has also turned off other companies, which might not want to list here. Carsome’s Singapore-based competitor, Carro, did not see any investment from 65 Equity Partners.

Market watchers have said that this could stem from Carro eyeing a listing in the US.

Other potential candidates managed by 65 Equity Partners include loyalty and rewards platform ShopBack and software provider Avepoint.

The investment firm may be choosing to maximise the chances of an IPO exit for its investee companies, by having a mix of established companies which investors are familiar with, as well as new debuts.

But given the many firms that have headed to Hong Kong and US already, the focus should be on supporting the first-time listing aspirants and ensuring that they choose to list in Singapore.

More work to improve market conditions will not go amiss. Indeed, in itself, a more vibrant market will naturally attract more listings.