SGX Listing – This is the fourth part of a series of articles on SME Business. In this article, we will discuss when and why you should be listing your company on the SGX and go public. In Singapore, companies aim to list on either the main board or the Catalist board of the SGX to go public and gain the benefit of a public listed share price multiple.
Key Reasons Why Companies undergo a SGX Listing
- Founding shareholders want to get the public multiple that their company will be worth when listed on a recognised stock exchange;
- Founding shareholders personal guarantees for their business will typically be discharged and the listed company will enter into new financing transactions with their bankers;
- Apart from funding for the listed company, the founding shareholders can take out loans against their personal listed shares;
- From the company’s perspective, listed companies get more press and have more credibility when doing business;
- Listed companies are able to use their shares as acquisition currency for the purposes of mergers and acquisitions.
When should you consider going public via a SGX Listing?
The minimum for a listing on the SGX on the Catalist board will be a net profit of not less than S$2 million over the last 2 to 3 years. We propose that if your company has stable net profit with some potential growth in the next 2 to 3 years, this would be an opportune time for an listing on the SGX.
How to achieve a good market price for your company?
Companies on the SGX typically do well if they are dividend plays so if you have an aim to pay a lot of dividends to investors, many investors will find your stock worthy to be acquired in Singapore.
What is the transaction team that you need to set up for a Stock Exchange Listing on the SGX?
Issuer legal counsel: This corporate law firm will represent the issuer of the company in preparing the prospectus and other legal documentation for the initial public offering.
Underwriter counsel: This law firm will usually act for the investment bank/underwriter for the transaction.
Underwriter/Investment Banker: The company will need an investment banking firm to lead the listing process and liaise with the SGX.
Accountant: You would need an accounting firm to prepare 3 years of audited accounts.
Financial PR Firm: It would be useful for you to engage an investors relation firm to help you market the brand of your newly listed company to encourage new investors to invest into your company once it goes live on the stock exchange.
Brokerage firm: You would probably need a brokerage firm to open a corporate brokerage account for your company if you want to do share buybacks from the open market.
How much does it cost to list a company on the SGX?
Assuming a non-complex case (i.e. a complex case is one where there are multiple subsidiaries in multiple locations which requires numerous legal counsels in the various markets), the cost of listing a company on the SGX is about S$1.5 million to S$2 million. Do contact us if you are interested in listing your company on the SGX, whether on the main board or Catalist.
How to properly use a listed vehicle on the SGX?
Some business owners think that the way to make money using a listed company is to get their share price up whether through legitimate means or otherwise. The best way to maximise the use of your listed company is to have a strategy to list an underlying business that is a cash cow and pay dividends and then have a second line of business that is in the growth phase. This ensures that your company fulfils the criteria of a good investment (i.e. having stability of return with potential upside).
The holy grail of running a conglomerate business
At the controlling shareholder vehicle/ family office level, you should adopt a strategy like a fund or sovereign wealth fund (which aims to stay in business for many generations and many years and is long term in orientation). Spend some time before listing thinking through the key assumptions for your business and decide which part of your business empire you want to list or keep private. You should have someone strategic at your family office level to ascertain market cycles. List your underlying business when the financial markets value that line of business and when the hot money cycles out of that sector, spend some time thinking of whether to delist that line of business or list in another stock exchange. If you figure this part out, you have joined the ranks of the large established business families in Singapore.
In conclusion, listing on the SGX via an initial public offering is one way to get listed on the SGX-ST. Engaging a proper professional team is important, including an equity capital markets lawyer for your transaction. Choose a good legal team early so that your company can be restructured early if necessary for a good IPO listing.
https://www.SingaporeLegalPractice.com is a corporate law and commercial law educational website headquartered in Singapore which aims to demystify business law and 新加坡商业法 for SME Company Owners, Startup Founders and 新加坡新移民老板。The information provided on this website does not constitute legal advice. Please obtain specific legal advice from a lawyer before taking any legal action. Although we try our best to ensure the accuracy of the information on this website, you rely on it at your own risk. Click here to signup for our newsletter today to be kept updated on the latest legal developments in Singapore.
Click here to speak to a specialist Corporate Law Practitioner today to advise you on your corporate transaction today. The corporate law team has acted for a diversified client base including transactions involving several hundred startups across the startup eco-system in Singapore and for private equity fund deals and is well placed to help you in your corporate transactions.
Signup for our website newsletter to be updated on the latest in Singapore law!
