Initial Public Offerings

SGX and Third500 to build a global Emerging Growth IPO market in Singapore

  • Third500 focused on providing private-to-public financing pathway for Emerging Growth companies via pre-IPO convertibles and listings on SGX
  • Through Third500, SGX can build a pipeline of quality Emerging Growth companies
  • Possible future cross-listing on Nasdaq for companies whose market caps grow to exceed US$500 million

Third500 Pte Ltd (Third500), the Singapore-based affiliate of U.S. investment bank, Healthios Capital Markets LLC, announced today that it is partnering Singapore Exchange (SGX) to build a pre-IPO and IPO market for venture-backed Emerging Growth companies.

Third500 focuses on companies which have each attracted on average US$60 million in private investments and are looking to further grow via the public markets.

Emerging Growth Investment Opportunity

The Emerging Growth segment represents a large and highly attractive investment market which historically has been served by IPOs, is desired by boards and management teams, and could be served by IPOs again.

As Emerging Growth companies seek to achieve the peak of their potential in a complex global market, an IPO is vital to their success. Globally, options for quality Emerging Growth IPOs at market capitalizations below US$300 million have become uncertain, increasingly retail, less institutional, insider funded, less covered by analysts, and less liquid.

According to the US-based National Venture Capital Association (NVCA), in 2017 there were 891 “Late Stage” equity investments in private companies, representing US$16.4 billion in disbursements and 20% of the total investment of private capital. For liquidity, Emerging Growth companies had 853 exits, of which 90% were M&A deals for less than US$500 million and only 7% were achieved through IPO. Despite valuation and liquidity constraints, “Late Stage” Emerging Growth investments yielded an internal rate of return (IRR) of 29.3%.

Market Development Plan for the Singapore Financing Pathway

During the past twelve months, Third500’s first four clients raised nearly US$200 million in growth capital, one of which has successfully completed an IPO on Nasdaq.

Using these initial successes as “proofs of concept”, Third500 and SGX will explore a Singapore Financing Pathway with 5,700 Emerging Growth private companies in the technology, telecoms, media, energy, medtech, healthcare IT, and consumer discretionary industries. In aggregate, these companies have attracted US$350 billion in historical investment, ranging from US$20 million to US$200 million per company (US$60 million on average), and have additional funding requirements estimated at US$350 billion. Venture- backed companies, such as these, currently comprise over 60% of the total market capitalization of companies listed on Nasdaq.

SGX and Third500 have developed a market development plan to support their Pre-IPO and IPO strategy. This plan features three principle initiatives dedicated to: (i) issuer origination; (ii) investor development; and, (iii) investment research.

SGX IPO Anchors the Singapore Financing Pathway

SGX is uniquely positioned to serve the financing and liquidity needs of Emerging Growth companies as they pursue their potential. Capitalizing upon a central and independent presence in Asia, Asian commercial market access, an English language common law regulatory environment, wealth centre leadership, and trusted regulatory system, Singapore and SGX is a natural “Venue of Choice” for Emerging Growth issuers and investors alike.

Mohamed Nasser Ismail, Head of Equity Capital Market (SME) and Head of Capital Market Development, SGX, said, “Third500 and Healthios focus on the issuers we are seeking and have a strong presence in Singapore. Their thoughtful pathway generates quality issuers which have Asian institutional investors and commercial strategies with a convertible linked to an SGX listing. This pathway has the potential to drive many listings to SGX, while serving the needs of issuers and investors.”

For issuers, SGX offers efficient and reliable access to the public markets in a manner consistent with their most important financing and strategic objectives. For investors, SGX provides a world-class listing environment in which to support the value and liquidity of their Emerging Growth portfolios, while permitting a seamless transition to Nasdaq listings and exit pathways.

“In a global economy that is increasingly dependent upon growth, the IPO is a vital financing instrument,” commented Fritz Reichenbach, CEO, Third500. “We are grateful for the opportunity to be a part of this important effort in Singapore and for the experience of working with great people in this extraordinary market. In addition to the team at SGX, we have enjoyed productive collaborations with the community of growth investors, sovereign investors, issue managers, underwriters, placement agents, regulators, accountants, securities counsel and professional advisors. On behalf of our growing team in Singapore and my colleagues in the US, I look forward to working with SGX to expand the global capital market for emerging growth companies.”