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Singapore offshore-listed companies consider ‘homecoming’ flotations

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Some of Singapore’s largest offshore-listed companies have considered whether to hold “homecoming” share sales in the city-state after approaches from its stock market and investment bankers.

The talks, which followed a recent wave of homecoming listings by Chinese technology companies in Hong Kong, would provide a boost for the south-east Asian nation’s bourse, the Singapore Exchange.

Singaporean companies that have discussed the move include Sea, an internet company that listed in New York in 2017, ride-hailing and food delivery app Grab and Hong Kong-listed gaming group Razer, according to several people familiar with the talks. Grab is separately listing via a special purpose acquisition company, or Spac, in the US.

The homecoming listings in Hong Kong were driven by political pressure from the US, but they have allowed the groups to raise large amounts from investors closer to their China headquarters.

SGX’s equity trading business, meanwhile, has been hurt by a series of accounting scandals that have led to delistings as well as low trading volumes.

It has struggled to attract tech names despite partnerships with the Nasdaq and Tel Aviv exchanges and has looked for other routes to grow, including a proposal to become the first bourse in Asia to allow Spac listings.

A US investment banker in Singapore said: “Historically the idea you could do meaningful local listings was only possible for a very select group, but that has changed dramatically in the last couple of years. The homecoming exercise in Hong Kong has created a huge amount of extra liquidity for those companies.”

SGX told the Financial Times it had seen “increasing interest in our secondary listing framework as companies see the value of being listed closer to home”.

However, one senior investment banker said the SGX’s small size meant secondary listings there “make little sense from a capital markets perspective but there may be political pressure”.

The market capitalisation of Singapore’s equity market totalled about $690bn at the end of April — equivalent to about one-tenth of Hong Kong’s $6.9tn market, according to FT calculations based on figures provided by the exchanges.

Sea, whose market value of $145bn makes it larger than most US tech stocks, has been approached by SGX and bankers about a possible dual listing, according to a person familiar with the matter.

The company has talked to its bankers at Goldman Sachs about whether to explore such a deal, according to a second person. Sea and Goldman declined to comment. 

SGX has approached a string of other high-profile foreign-listed companies, according to a senior investment banker in Singapore familiar with the matter.

Grab, south-east Asia’s answer to Uber, has looked into whether to carry out a secondary listing in Singapore after it completes its $40bn Spac deal to list on Nasdaq, according to two people close to the matter.

The ride-hailing giant, whose backers include Singapore state investment fund Temasek, said: “We’ve explored opportunities in south-east Asia, but do not have plans for a secondary listing now.”

Hong Kong-listed Razer, which sells video game electronics, is in talks with banks about listing on a second exchange, according to two people familiar with the matter.

South-east Asia has benefited as international investors diversify away from China amid geopolitical tensions with the US, and following growth in its tech and consumer sectors. 

David Biller, head of investment banking for south-east Asia at Citi, said countries such as Indonesia, Malaysia and Thailand were “now at the forefront of investable growth in the region away from China and India”.

Martin Siah, head of south-east Asia global corporate and investment banking at Bank of America, said it had been a “breakout year” for investment banking activity in south-east Asia, particularly in Thailand and the Philippines.

This year, investment bank fees from deals in countries in the Association of Southeast Asian Nations, whose largest markets are Singapore, Indonesia, Thailand, Malaysia and the Philippines, are at a near-record level of $175m, according to data from Dealogic.

Additional reporting by Hudson Lockett in Hong Kong

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IPOs / FFOs

Robinhood push to democratise finance falters with own shares

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Robinhood updates

Robinhood has had a pretty clear pitch as it has taken on Wall Street’s traditional brokerages with its trading app — democratise finance for all.

That slogan hearkens back to the origins of the company in 2013 in the wake of the Occupy Wall Street protest movement, which railed against wealth inequality and the power of big banks.

Robinhood’s co-founders said they saw a need to disrupt the established, elitist financial system and make equity markets more accessible to everyday investors.

That pitch — reinforced with branding that played on the original Robin Hood ideal of stealing from the rich to give back to the poor — helped make the company the brokerage of choice for many new, young investors piling into equity markets since the start of the pandemic.

But in making its $32bn initial public offering this week, corporate governance activists believe the upstart company has not lived up to the democratic ideals of its mission statement.

Robinhood offered up to 35 per cent of its shares to its own customers, offering access for retail investors to a part of the market traditionally reserved for large investment institutions. It allocated the shares itself, bypassing traditional Wall Street banks by using the new IPO access feature on its app.

However, it has eschewed what corporate governance experts believe is the gold standard for shareholder structures of one share, one vote.

Not all Robinhood shares are created equal. Its co-founders will retain an extraordinary level of control over their company after it goes public. Robinhood’s dual class structure means the shares sold to retail investors and institutions carry one vote, while the shares held by its co-founders Vlad Tenev and Baiju Bhatt carry 10 votes per share. 

The former high-frequency traders will own approximately 16 per cent of the company’s shares (7.9 per cent each), yet control 65 per cent of the votes, with Tenev holding 26.2 per cent and Bhatt holding 39 per cent, according to the company’s prospectus.

Dennis Kelleher, the chief executive of Better Markets, a financial reform advocacy group, said it was not clear that retail investors understand that “the owners of Robinhood are rigging share ownership in their favour”.

“Robinhood should tell retail traders that its shares available to them are in fact impaired shares that are always going to be less valuable than the shares of people running Robinhood for their own benefit,” he said.

Some 85 per cent of companies in America that went public in 2020 used one share one vote structures according to data from the Council of Institutional Investors, a corporate governance advocacy body. However, many higher profile companies — particularly in the tech sector — have more power over their investors to push through dual-class structures.

When ride-hailing service Lyft went public, for example, its co-founders owned just 5 per cent of the stock but held on to 49 per cent of the votes using a 20 to 1 dual share structure. In some companies, the extra voting rights even extend to the afterlife. Pinterest founder Ben Silbermann was also issued shares that gave him 20 times the number of votes of common stock shareholders, a privilege that gave him voting rights for up to 540 days after his death.

If the company actually succeeds, the shareholder power imbalance will widen. Tenev and Bhatt’s voting share rises if the share price hits certain price targets. If they receive their maximum agreed compensation including shares, the co-founders’ voting rights would represent more than 75 per cent of total shareholder votes in the company, according to the company’s prospectus. 

IPO investors raised concerns about the dual class structure, and the unusual amount of power it gave both Tenev and his increasingly silent partner Bhatt. Both have been dealing with numerous regulatory interventions as a result of their “move fast and break things” approach to Robinhood’s early growth. 

One large money manager who declined to invest in the IPO said: “You have no power over the management team if you want to get rid of them, and that is something to worry about.”

Premium valuations placed on hot companies with dual voting class structures in IPOs also tend to dissipate in subsequent years, according to research from the European Corporate Governance Institute on US companies from 1980-2017.

David Erickson, a lecturer at the University of Pennsylvania’s Wharton business school and former IPO banker, said it was not uncommon in recent years for tech companies over the last few years to have a dual-class voting structure. But he said it was odd to have one if a company was claiming to democratise investing.

“One share one vote is how you democratise investing,” he said.

madison.darbyshire@ft.com



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Duolingo: threatened by free riders — and electronic Babel fish

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Technology sector updates

Welcome to Duolingo! Congratulations for signing up to the world’s largest language app. Your chosen tongue is start-up-ese.

Exercise Onespot the dissonant word or phrase on this list: fast growth; large losses; initial public offering; Pittsburgh.

Duolingo’s Pennsylvania HQ makes it an outlier. But it has not stopped the edtech company from joining the US listing rush. Shares ended the first day of trading up 36 per cent. Duolingo’s near $5bn market value is double its last private valuation and a huge 31 times trailing revenues.

To justify that, the business will need to turn a lot of free users into paying customers. Just 4.5 per cent of users pay at present.

The lossmaking company promises users they can master one of 40 languages by practising for a few minutes each day. Gaming-style tasks make courses addictive. Common content means overheads are low. Cost of revenue accounted for 28 per cent of the top line last year.

A pandemic boost nearly doubled revenues in the last quarter, up 97 per cent on the same period the year before to $55m. Duolingo’s freemium model aims to make money in three ways: adverts, a $12.99 monthly premium subscription to avoid them and a $49.99 English language certification. Subscriptions account for nearly three-quarters of sales.

Spotify is the most compelling recent example of freemium success. It took 13 years to become profitable. So Duolingo’s $13.5m quarterly net loss after nine years in operation need not be a deal breaker. Revenue per user in the last quarter was $1.38. Spotify, which is profitable, reports over €6 ($7.15) per user.

Duolingo believes rival apps pose a risk — though its brand is the strongest in its field. The big existential threat is an AI translation tool that works well in real time. Zoom, Apple and Google are among the companies working on voice tech products. An electronic Babel fish — the living translator imagined by sci-fi writer Douglas Adams — might dissuade novices from ever bothering to learn a new language.

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Trading app Robinhood sets share price at low end of range in IPO

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IPOs updates

Robinhood has priced its shares at $38 apiece, the low end of its target range, reflecting slack investor demand for the highly anticipated initial public offering of the popular trading app.

The company, which aimed to sell 55m shares, had set a range between $38-$42 a share. While the hottest tech IPOs often price above of expectations, Robinhood’s value indicates that investor appetite was not insatiable for the brokerage’s stock.

The $38 final offering price announced late on Wednesday gives Robinhood a valuation of $31.7bn. Private investors previously valued it at more than $11bn in August. Shares are expected to begin trading on Thursday on the Nasdaq stock market.

California-based Robinhood became a venue of choice for many first-time stock investors, offering commission-free trades that it encouraged with rewards, bonuses and push notifications. With a median age of 31, its customers are often younger and have smaller account balances than those of established online brokerages such as Schwab, Fidelity and ETrade.

It has recorded explosive growth, doubling the number of accounts on its platform since the start of the year to 31m.

However, Robinhood has also come under fire from regulators for the game-like features on its app, limited customer service, and dependence on a controversial practice of selling trades called payment for order flow. In June the Financial Industry Regulatory Authority fined Robinhood $70m for causing “widespread and significant harm” to customers. It was the biggest penalty ever issued by Finra.

The offering allocated up to 35 per cent of shares to its own customers. Modest appetite for Robinhood’s IPO suggests investors were not immune to the recent high-profile scrutiny as well as concerns about how the brokerage would sustain its high trading volumes in a post-pandemic world where people had time for other pursuits.

Robinhood’s offering paves the way for a windfall for its executives and investors. At the IPO price, Robinhood co-founders Baiju Bhatt and Vlad Tenev would own shares worth $3bn and $2bn, respectively.

Index Ventures, the company’s largest outside investor, would have a stake worth $3.2bn.

Robinhood’s extraordinary growth has periodically led to technical outages during periods of elevated volume, and during a meteoric rise in shares of the meme stock GameStop in January the platform had to suspend trading and raise billions in order to meet capital requirements to market makers.

Investors that provided the $3.5bn in emergency funding stand to receive shares at a 30 per cent discount to the offering price, as their debt converts into equity.

Bhatt and Tenev will retain majority voting control over Robinhood through a dual-class share structure, meaning they will have a minimum of 65 per cent of the voting rights despite holding less than 20 per cent of the company’s shares.

This high level of voting control was cited by institutional investors as a concern in participating in the offering, despite Robinhood’s strong recent performance.



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