Singapore companies’ love affair with Nasdaq continues despite post-IPO heartaches

SINGAPORE-based companies continue to flock to the Nasdaq exchange in the United States, even though data shows it is tough for smaller players to win investors there.

Two tech-enabled startups from Singapore recently made surprising moves to list on the Nasdaq: property platform Ohmyhome and facilities management platform Simpple.

These initial public offerings (IPOs) raised less than US$20 million combined, and neither have performed well since listing.

Ohmyhome’s share price has fallen some 27.8 per cent from US$4 at IPO to US$2.89 as at Monday (Oct 9). Simpple is down 2.5 per cent.

Those declines pale in comparison with the 87.8 per cent fall in the value of JE Cleantech, a cleaning and dishwashing specialist, and the 71.1 per cent fall in the value of on-demand mobility platform Grab.

In spite of this loss in shareholder value, yet another company is set to join the list of Nasdaq-listed Singapore names. Financial comparison platform MoneyHero will complete a business combination with Bridgetown Holdings on Friday at an enterprise value of US$342 million.

Chan Yew Kiang, IPO practice partner at consultancy EY, said many companies view a US listing as a “holy grail” because of its association with Big Tech companies.

Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Netflix, Nvidia and Tesla are all Nasdaq companies.

The US bourse also has lower barriers to entry, including tiered financial and liquidity requirements. In particular, it is not necessary for a company to be profitable before listing.

Singapore Exchange has a similar arrangement for its sponsor-based Catalist board: companies do not need to show profitability, and sponsors determine the suitability of a company to list. The problem is that sponsors are not as comfortable with negative cash flow companies, said Chan.

Nasdaq offers issuers three tiers: Nasdaq Capital Market, Nasdaq Global Market and Nasdaq Global Select Market. Companies with a large market capitalisation of over US$10 billion are admissible to the Nasdaq Global Select market, which has about 1,200 companies – including Grab.

Companies with a smaller market capitalisation of between US$2 billion and US$10 billion make up the mid-tier Nasdaq Global Market. The smallest companies, with a market cap of below US$2 billion, fall under the lowest tier, the Nasdaq Capital Market, where Ohmyhome and Simpple are listed.

“Nasdaq is less prescriptive. No one is judging the merits of your listing, they are just judging if you have adequately disclosed the issues,” said Thomas Tarala, partner at law firm Baker McKenzie.

Tech companies and smaller businesses have historically been associated with Nasdaq due to the exchange’s focus on growth, according to Ridgway Barker, US corporate partner at law firm Withersworldwide.

“The initial listing fees, maintenance fees and less stringent financial requirements allow companies to save and reallocate capital,” he said.

These benefits come at a cost to Singapore companies, though: a danger of being lost in the crowd.

Over 3,000 companies are listed on Nasdaq. Companies need a valuation of at least US$1 billion to even mildly pique US investors’ interest.

“You wind up being orphaned and lost in the shuffle,” said Tarala.

The brokerage houses that put out research on and generate trading interest in a company are unlikely to pay attention to the stock of a small company.

Companies also need to find a way to share their plans with investors while sticking to the facts, according to EY’s Chan. “It is important to not over-promise, especially in the US market,” he said.

This can be an especially tough balance to strike for the management of Asian companies, who tend to be more conservative.

In a litigious market such as the US, over-promising often results in class action lawsuits brought on by shareholders against directors of companies. This makes the ancillary costs of listing in the US higher, as companies face higher insurance premiums for director indemnity.

Underwriting fees are also higher versus a Singapore listing. US underwriters charge around 5 per cent to 6 per cent, compared with 2 per cent to 3 per cent here.

Another consideration is timing, as Nasdaq’s review process takes between four and six weeks. That is not including the time needed to register the IPO with the US Securities and Exchange Commission.

“This can be a lengthy process, and a company thinking of listing would need to factor in the time and costs into their plans,” said Withersworldwide’s Barker.

These considerations should weigh on the minds of those looking to list on Nasdaq, even if the decision on where to list is often influenced by the bankers doing the deal. Should companies still decide to go through with a listing on Nasdaq, they must have a good story to sell to investors.

“If you have a good equity story you are confident of executing, that can help companies who are small not to worry about not being profitable – as long as you are prepared to disclose it,” said EY’s Chan.