GIC, Temasek poised to reap capital gains bonanza from tech IPO season

Singapore

SINGAPORE'S sovereign wealth fund GIC and state investor Temasek may make some sweet paper gains as tech firms backed by the two investment giants head for the public markets.

Some of the shine is dulled given the fall from grace of Ant Group. Its mammoth initial public offering (IPO) - cancelled last year amid political tension - would have meant a bonanza for the two Singapore investors and other global institutional firms.

Still, GIC and Temasek have some aces in hand. Their portfolios of venture-backed companies include Gojek, cryptocurrency exchange Coinbase, gaming platform Roblox and artificial intelligence company SenseTime. These are reportedly eyeing a public listing amid a global rally in tech stocks.

Both GIC and Temasek are global giants in the world of tech investments, which come with hopes of dazzling returns from the fourth industrial revolution.

Temasek emerged as the top tech investor in Global SWF's survey of 438 state-owned investors in 2020. It deployed some US$2.3 billion into tech-related sectors, especially in e-commerce and life sciences.

Temasek's venture-capital related (VC-related) investments alone grew an estimated 27 per cent to US$2.54 billion, said Global SWF.

GIC was the second biggest direct investor at US$2.2 billion, leading investments in data centres and cloud technology. Its VC-related direct investments fell 24 per cent to US$1.47 billion in 2020, Global SWF said.

It is unclear the specific extent of the paper gains for GIC and Temasek across their entire tech portfolios, especially if they have supported these startups from cradle to IPO.

Funding rounds at early stages are often scant on details, while dilution down the line makes it difficult to nail down the latest pre-IPO stakes.

Still, GIC and Temasek have already seen their stakes in some companies soar in value after the firms recently went public.

Food delivery player DoorDash, buy-now-pay-later company Affirm and short video app Kuaishou all enjoyed first-day pops in their market debuts.

GIC's 8.37 per cent stake in DoorDash has risen to about US$4.5 billion in value. GIC had invested at least US$155.1 million in the company across four late-stage financing rounds, based on DoorDash's IPO prospectus. This would mean a paper gain of almost 30 times. (Funding from GIC in earlier rounds was not disclosed.)

GIC and Temasek were also tied to the recent IPO of Bytedance-rival Kuaishou, through earlier investments by associates and units.

GIC and Temasek-owned Aranda Investments became cornerstone investors in Kuaishou's US$5.4 billion Hong Kong IPO in February - the biggest tech IPO since Uber's US$8.1 billion IPO in May 2019.

Closer to home, the first wave of public listings among South-east Asia's unicorns could mean another paper-gain bump.

GIC is likely the single-largest shareholder in Indonesia-based Gojek, based on regulatory filings in Indonesia seen by venture builder Momentum Works.

As at March 2020, the sovereign wealth fund held 7.29 per cent of Gojek. The figure does not account for any dilution from later funding rounds.

GIC is buying a 9 per cent stake in Indonesian digital bank Bank Jago, after Gojek - doubling down on financial services - in December spent US$160 million to raise its stake in the lender to 22.16 per cent.

Temasek is also a backer of Gojek. The state investor joined the firm's US$1.2 billion funding round in 2018, Reuters reported.

Gojek could merge with Temasek-backed e-commerce unicorn Tokopedia into an entity with a combined valuation of more than US$18 billion, Bloomberg has reported. The firms are said to be eyeing a dual-listing in the US and Indonesia with a target US$35-40 billion valuation.

Temasek, through Anderson Investments, held a 3.28 per cent stake in Tokopedia, based on regulatory filings in Indonesia dated November 2020.

GIC-backed Traveloka is also looking to go public in the US, and may merge with a blank-cheque firm. South-east Asia's largest online travel app raised US$420 million in a funding round led by GIC in 2019, Dealstreetasia reported then based on sources.

Daniel Brett, the head of research and data at Global SWF, said GIC and Temasek are regarded as "trailblazers in VC within the sovereign investor universe".

He noted that tech company valuations have jumped with each private funding round, and there is indication of a significant growth in value for state investor shareholdings when these companies go public.

GIC and Temasek could have booked even larger gains had Chinese regulators not slammed the brakes on Ant Group's US$37 billion dual listing in November last year.

Both investors had taken part in a June 2018 financing round that raised a whopping US$10.3 billion from offshore investors.

Through entities owned or controlled by them, GIC pumped in about US$780 million and Temasek invested about US$500 million, based on BT's calculations (assuming a consistent price per share).

Ant Group's IPO would have valued it at around US$313 billion, a jump from the post-investment valuation of US$150 billion after the 2018 funding round. But its future is now shrouded in uncertainty.

GIC was also hurt by its association to Luckin Coffee. The former darling touted as Starbucks' worthy competitor in China was found to have faked sales, and has since filed for bankruptcy.

The stock plunged as much as 97 per cent from its all-time high before being delisted from the Nasdaq. GIC reportedly trimmed its stake in the firm ahead of the accounting scandal.

Singapore's state investors have the stomach for the boom and bust, and have held on to their long-term views, observers told BT.

Temasek has in recent years expressed interest in what it terms "aspiring unicorns" - startups with the potential to hit a US$1 billion valuation.

It has backed companies in South-east Asia including cashback platform ShopBack, biotech firm Tessa Therapeutics and beauty platform Sociolla.

Its senior executive told BT back in October 2019 that it sees more sane valuations in the "aspiring unicorns" space.

GIC said in 2018 that it manages risks in tech investments by diversifying across sectors and lifecycle stages, ensuring that it abides by a robust investment process. It said that it adheres to strict pricing discipline while understanding the risk-reward calculus and sizing the investment.

Willson Cuaca, whose early-stage VC firm East Ventures has a number of South-east Asian portfolio companies backed by GIC and Temasek, said state investors have the institutional knowledge and discipline that improve the governance of a growth-stage company.

These investors are also a form of patient capital with global exposure, he said. "To go beyond, you need someone who really knows how to look at South-east Asia and how to see the world."

READ MORE: Tech players in GIC and Temasek's portfolios

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