Exit push by private investors expected to fire up IPO market

COMPANIES that have been relying on private funding for growth will have to return to the public market at some point, industry players said.

They are also looking to the US stock market for signs that valuations are on the mend.

The expected listing of chip designer Arm could pave the way for a stronger recovery in initial public offerings (IPOs) globally.

Pol de Win, senior managing director and head of global sales and origination at the Singapore Exchange (SGX), said improved investor confidence in the US should extend to Singapore too.

“There will be some pent-up supply of companies that have put their plans on hold for a couple of years now,” he said on the sidelines of an investor engagement event organised by SGX and DBS last week.

The pipeline of companies seeking public capital is still strong in terms of quality and quantity, he added.

“Many of these companies have been financed by private capital for a longer period now, and these private capital suppliers need access to liquidity. That’s where the public market comes in.”

Anuruk Karoonyavanich, head of capital markets at DBS, also said there is a long line of companies waiting to go public.

Many had to raise capital for expansion during the Covid-19 period, and their investors are now at the stage of looking to exit their positions.

“I think the biggest stumbling block for companies trying to go public is that the valuation levels that they need will be relatively higher than where public markets are at,” he said.

High interest rates also mean that investors have plenty of low-risk investment options, and may therefore be unwilling to invest in companies with steep valuations.

“It’s more attractive to… put money in safe havens and treasuries,” said Karoonyavanich.

For now, he said there is appetite for early-stage businesses with the “right type of disruption technology”.

He expects the IPO market to recover from next year: “We are at the stage where we feel that rates may have already peaked, and there’s a likelihood that in the second half there will be some reduction. This allows for people to prepare and plan for business investments, funding, financing, and access to capital markets.”

Indeed, some of the companies at the event said they would be looking to raise funds in the public markets 18 to 24 months from now.

Althea Lim, group chief executive and co-founder of talent agency Gushcloud, is looking to list in the US in two years’ time at the earliest.

Combat sports organiser One Championship’s chief financial officer, Jesley Chua, is also looking at a US listing. This would make the most sense for the business given its global nature, she said.

The company is aiming to hit profitability within the next 18 to 24 months before it looks at an IPO.

“There are many things to consider… (including) the macro environment and market conditions, which many people know are currently not great. To pull off a successful IPO, many things have to align. So, don’t rush into it,” she said.

Singapore-based collectibles company Mighty Jaxx similarly sees an IPO in the cards in the next two years.

Its founder and chief executive Jackson Aw said the company aims to broaden its range of product categories before it considers a listing.

In spite of the publicly expressed preference for a US listing among quite a few companies, DBS’ Karoonyavanich said Singapore remains an “ideal environment” for such a move. “They have the backing of an environment in which they can build their business and export their technology, business model and services elsewhere.”

SGX’s de Win added that South-east Asia generally should attract a lot of capital inflow and attention over the next five to 10 years, as its economies “are going to do better than most economies elsewhere”.

“Singapore, being at the centre of this region, is continuing to attract family offices and bringing meaningful funds to be deployed here,” he said. “It is seen as a trusted place to invest in, and this is increasingly important in today’s ever-more complex geopolitical environment.”