THE Singapore-based affiliate of American investment bank Healthios Capital Markets LLC is partnering the local bourse to build a pre-IPO (initial public offering) and an IPO market for emerging growth companies.
The move will help create a pipeline of companies that could eventually be listed on the Singapore Exchange (SGX).
The affiliate, Third500, focuses on companies that have each attracted on average US$60 million in private investments and are looking to extend their growth via the public markets, such as through pre-IPO convertibles, and listings on the SGX.
Third500 added that Singapore was chosen for its trusted regulatory system and Asian commercial market access, with the SGX "uniquely positioned to serve the financing and liquidity needs of emerging growth companies".
Over the past year, Third500's first four clients raised nearly US$200 million in growth capital; one of them has successfully completed an IPO on the Nasdaq. Riding on these successes as "proofs of concept", Third500 and the SGX will explore a Singapore Financing Pathway with 5,700 emerging growth private companies in various industries.
These companies have attracted US$350 billion in investment in total - ranging from US$20 million to US$200 million per firm - and have additional funding requirements estimated at US$350 billion.
Third500's chief executive Fritz Reichenbach said these companies therefore need as much as they have already raised to expand further.
He noted that, of the 5,700 companies, 750 are in the medtech and healthcare IT industries, with about 10 per cent of them being suitable for listing on the SGX as a conservative estimate.
The Business Times understands that companies on the horizon for a potential listing on the SGX include data-centre startup Nautilus Data Technologies Inc, in which Keppel T&T has a stake; maker of needle-free injection technology PharmaJet; as well as biopharmaceutical firm Liquidia.
To facilitate their pre-IPO and IPO strategy, the SGX and Third500 have developed a market-
development plan comprising initiatives in three main areas:
Investor development; and
For companies whose market caps grow beyond US$500 million, a cross-listing on the Nasdaq might be possible, Third500 said.
Asked how this latest development builds on SGX's tie-up with Nasdaq announced last October, SGX's head of equity capital market (SME) and head of capital market development, Mohamed Nasser Ismail, said: "The partnership with Third500 gives US companies seeking to expand into Asia better access to growth capital through SGX's listing platform, known for its stability and reliability of both primary and secondary fundraising.
"Tapping the available growth capital here, these companies will become more mature; they can eventually take advantage of SGX's partnership with Nasdaq to seek a dual-listing there."
Overall, sentiment on the ground is that the collaboration between SGX and Third500 will prove beneficial for both parties.
Barry Lee, head of Capital Markets Group at KPMG in Singapore, said: "The move allows SGX
to use Singapore as a base to attract international, quality emerging growth companies that are seeking fresh growth capital, in particular those that are later-staged and US venture-backed that may also be considering Singapore as an exit destination.
"For many of these emerging companies, they could be pulled by the opportunity to widen their investor pool, and see Singapore as a strategic gateway to grow their Asia-Pacific business presence..."
"SGX's tie-up with Third500 will help it to build a more ready pre-IPO platform by pre-selecting and cultivating a pipeline of companies that could eventually list here and in other markets when they mature."
Separately, Leong Chuo Ming, partner in the corporate team at Withers KhattarWong, said this partnership can be viewed as SGX's efforts to keep up with the latest market trends by leveraging the expertise of industry players and other platforms. However, he notes that for such a tie-up to be effective, SGX still needs to independently improve its competitiveness, and give good reason for potential issuers to choose it over its competitors. "While SGX is trying to position itself with a focus on emerging markets to carve out a niche, what this means for the IPO market in Singapore is yet to be seen. Factors such follow-up, execution and volatile market conditions will play an important part."