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Singapore's first fintech listing will be litmus test for risk appetite

The government's goal to nurture technology start-ups puts focus on valuations

SINGAPORE (NewsRise) -- The Singapore Exchange could see its first financial technology listing by mid-year, a development that will indicate just how much risk the city-state's investors are prepared to take with fast-growing technology firms that seek high valuations before turning a profit.

Ayondo, which provides social trading and brokerage services, expects to complete its "reverse takeover" of a small Singapore-listed property developer in May this year, chief marketing officer Sarah Brylewski said on Tuesday at an SGX forum on investing in social network companies.

The European firm announced its reverse takeover plans in June last year, saying it would inject its business into Starland Holdings in exchange for new shares. While the deal values Ayondo at 157.5 million Singapore dollars ($111.8 million), the company's actual market value will only be known when it starts placing out the new shares to investors.

Ayondo, whose largest shareholder is Singapore private equity investor Luminor Capital, said it opted for a reverse takeover to simplify the route to a listing. By comparison, making an initial public offer involves more processes.

A successful entry by Ayondo would boost SGX, which has struggled to widen its new listings beyond the property and oil-and-gas related sectors that are established favorites with domestic investors.

Singapore is keen to develop and nurture promising start-up technology firms from around the world as part of a plan to drive economic growth in the next decade.

Last month, the government's high-level Committee on the Future Economy unveiled several strategies, which included developing a strong public equities market that could properly value technology companies and provide incentives for early investors and employees to grow with the company.

Over the past year, the Singapore bourse operator has organized or sponsored workshops and forums to reach out to tech entrepreneurs and investors.

SGX is now considering allowing dual-class shares, which are popular with tech firms in the U.S. as they give business owners greater voting rights, allowing them to retain control.

Some observers say that while SGX is making the right moves, it will have a tough time changing investor perceptions.

"Investor attitudes here tend towards the conservative with people preferring rent as an investment vehicle," said Jarrod Luo, who co-founded blockchain start-up Tembusu Systems and is a consultant to other fledging companies. "The barriers to fundraising encountered by new ventures and start-up companies are not so much regulatory as they are with mindset and investment attitudes," he said.

Robson Lee, a partner at international law firm Gibson Dunn's Singapore office, said there has been an "Uber-ization" of financial platforms and SGX will have to compete with fellow exchanges as well as private markets and other new technology platforms for new listings.

In recent years, several Singapore tech firms have opted to list in overseas markets like Australia where they can command higher valuations and find a larger pool of potential investors.

For example, social media company Netccentric, whose stable of bloggers includes several Singapore celebrities with hundreds of thousands of followers, chose to list on the Australian Securities Exchange in 2015.

Singapore-based Garena, an online gaming portal and e-commerce provider that is Southeast Asia's most valuable start-up with a valuation north of $3 billion, is also looking at an overseas listing, according to various media reports.

According to these reports, Garena has appointed Goldman Sachs to manage an initial public offering on Nasdaq that could fetch around $1 billion.

"SGX has made progress though it's still early days," said Vinnie Lauria, ‎managing partner at Golden Gate Ventures, an early stage venture capital firm that has organized events jointly with SGX. Golden Gate's portfolio includes the high-profile start-up Carousell, an online market for second-hand goods that is popular in Singapore and other Southeast Asian countries.

"Over the past year, you've seen them...reaching across the aisle to the other side, and making changes to rules in response to feedback," he said.

Lauria added that it made sense for smaller companies to list closer to home where potential investors are familiar with the brand and business model.

Ayondo, which has licenses from U.K. and German financial authorities, operates trading platforms that cover a wide range of financial instruments. It is a pioneer in social trading, which allows investors to replicate trades done by an expert using a fixed amount of money.

In Singapore, Ayondo has teamed up with KGI Fraser Securities to provide a platform for investors to trade Contracts for Difference or CFDs, tradeable derivative instruments based on specific underlying assets or market indexes.

According to Brylewski, Ayondo chose to list in Singapore because the city-state is a major center for financial technology and as the company plans to expand in Asia. The company's Singapore operations include a research and development facility and a firm it acquired last year called TradeHero, the developer of a popular investor education app.

Ayondo declined to reveal its latest financial results. However, previous filings by Starland, which reports its earnings in Chinese yuan, showed the European firm suffered a net loss of 75 million yuan ($10.1 million) in 2015 as revenues jumped two and a half times to 83.4 million yuan.

--Kevin Lim

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