Sea, Razer IPOs will get more startups to go public, but when will SGX attract them?

Sea chairman and CEO Forrest Li and president Nick Nash on the podium of the New York Stock Exchange on Friday / Photo credit: NYSE

Singapore’s gaming and ecommerce unicorn Sea announced a US$884 million initial public offering this past October, ultimately raising a total of US$989.3 million thanks to strong investor demand. US-headquartered Razer, another well-loved company with ties to the island nation, had a US$528 million listing in Hong Kong just a month later.

This double whammy wasn’t as impressive as some of Southeast Asia’s IPO blockbusters in 2017. For example, Netlink NBN Trust’s US$1.7 billion listing on SGX topped the IPO charts (Netlink is Singapore’s fiber broadband network owner and telco Singtel’s broadband unit). Cromwell European Real Estate also listed on SGX, raising US$1 billion.

[The Sea and Razer IPOs are] a data point that VCs and founders can point to.

But for the tech startup scene, the Sea and Razer IPOs were still a crackerjack. Not only were the trade debuts long-awaited milestones for both companies, they were also an effective bellwether for Southeast Asian companies with public market aspirations.

Companies in Southeast Asia were waiting to see how the Sea IPO would pan out, so there was subsequently a lot of interest from local and regional tech companies in US listings. Sharon Lau, the Singapore office managing partner of law firm Latham & Watkins, predicts that there will be more high-profile IPOs from the region in late 2018 or early 2019, although she doesn’t share any details.

Rajiv Gupta, also a partner at Latham & Watkins in Singapore, says that local advisors, including banks and lawyers, were asked by IPO candidates to wait and see how the Sea listing would go before going forward with their own. “It was almost seen as a litmus test for the appetite for an Asian tech company IPO in the US,” he says, adding that interest remains strong after the listing.

This holds true even though both companies’ stock prices have dropped since and are trading below their IPO price. Sea’s stock opened today at US$12.58 in NYSE, having started at US$16.26, and Razer’s stock price opened at HKD 3.79 in HKG, having started at HKD 4.58.

“I think it is a recent indicator – a data point that VCs and founders can point to,” says Ferish Patel, partner at law firm Gunderson Dettmer.

The bell tolls for IPOs

Because Sea and Razer listed outside of Singapore, the market they’re more closely associated with, it adds to the debate about the city-state bourse’s attractiveness to tech startups.

This is not so much an indictment of local markets – IPOs in the region are doing quite well, in fact. “2017 was a record year for ASEAN IPOs and technology listings was the second largest category,” says Nam Soon Liew, managing partner at ASEAN Financial Services for Ernst & Young.

According to the Transaction Trail 2017 Report by valuation and financial advisory firm Duff & Phelps, IPO capital value in Singapore doubled last year in comparison to 2016.

Singapore needs to do more