Several years ago, Shopee’s parent company, Marine Group, was one of the first SEA companies to be listed on the New York Stock Exchange (NYSE). Recently, TDCX, Singapore’s digital customer experience (CX) provider announced successful on the NYSE too.
closer to home, MoneyLion’s Foong Chee Mun became the first Malaysian fintech founder to secure an IPO on the NYSE. There are also headlines around Grab, PropertyGuru and similar tech giants heading towards the same goal.
This success story has raised questions from SEA Soonicorns (soon to be unicorns) who are also striving for similar advancements. In a Wild Digital SEA 2021 panel, Laurent Junique, founder and CEO of TDCX, shared his insights on how he knew his startup was ready to go public.
Moderated by Kit Wong, CFO of Catcha Group, the discussion highlighted the benchmarks SEA startups need to get their IPO listings. The panelists also explored areas of consideration that companies need to consider before doing so.
But what’s so great about the NYSE?
The NYSE is known as one of the “gold standards” for companies around the world to be listed. In addition to its prestige, companies that conduct IPOs are said to have better investment opportunities and higher liquidity, according to Delano.
In addition, the NYSE is also unique in that it has human market makers in the field who are tasked with guarding the shares of several companies. They even have to provide their own capital to support their business shares, so investors and issuers have more confidence in their shares.
This incentivizes market makers to ensure the companies assigned to them perform well.
Kit added his two cents, “For what it’s worth, Catcha Group is also listed on the NYSE and partly because of the human element in market making, having someone to talk to makes a difference.”
How to know your company is ready for listing
Become a unicorn
Laurent started the discussion with his experience of how he knew TDCX was ready for its IPO. Scaled from 13 to 14 thousand employees over 26 years, TDCX has grown from providing customer experience solutions (CX) only for clients in Singapore to clients across Southeast Asia.
Soon after, the team realized TDCX’s potential to capture the global market as well, which led to Laurent’s decision to bring TDCX to the public market.
Andy presented his point from a market cap perspective, stating that the rule of thumb for companies to know they are ready for public listing is to first achieve unicorn status. Having a market cap of at least US$1 billion is helpful because it shows that the company has scale that investors will care about.
“Back then, you were too big for investors not to see you,” Andy said.
Delano agreed, but revealed that the NYSE listing standards only required a minimum market cap of US$200 million to accept an IPO, but achieved lucrative unicorn status.
Know your market fit
While IPOs are generally agnostic to the types of companies listed, Andy emphasizes the importance for companies to know their truly manageable market and plan to grow from there. But first, a company must take a step back to review what their business is and find out how they can serve the market, domestic or international.
To illustrate his point, he points to the success of the Indonesian market, Bukalapak, registered domestic on the Indonesia Stock Exchange. He said that the company has a very strong understanding of the local market which is reflected in its branding and internal systems.
Laurent chimed in with his experience on the pitch. When choosing an exchange where TDCX will be listed, they are advised to look at which markets have the most industry peers in their sector, and find them in the US.
However, having more industry peers means more competition, which means that TDCX needs to differentiate its stories and offerings to stand out.
“Because we are from SEA, a high-growth region, we have a unique proposition to investors. Now we don’t just choose the US, we choose the NYSE, because we believe it’s important to have a driven exchange for entrepreneurial support, which is spectacular there,” said Laurent.
TDCX also advised that the NYSE is a market that has more liquidity as well, and getting an IPO there would give the company access to global investors.
“To give a figure, the NYSE trades about US$150 billion daily, so this is a very large pool of liquidity,” Delano added.
Have a solid business trajectory post IPO
The panelists pointed out that companies wishing to go public must also regulate the trajectory of their business. This includes the company’s future plans for fundraising related to the stock exchange liquidity point of view.
Laurent can relate to this, and recalls that TDCX actually delayed its listing when the pandemic hit in 2020. This was because the team didn’t have enough future visibility into how the company would operate during the pandemic or in the new normal. .
“We want to be in a better position to explain our story to investors. We don’t want to be in a position where we don’t know what to do,” he said.
“You want to have confidence, and be able to project where the company is going in the coming quarters. You want to show your best foot forward.”
Getting ready to go public
Tidy up your documents
Based on Andy’s experience, companies generally underestimate the amount of effort and time it takes a company to go public. He further explained that the kick-off into the listing process involved hiring bankers, accountants, and lawyers to initiate audits and file the necessary paperwork.
This process usually takes 6-8 months before anything further can happen, such as marketing the company to investors.
Andy advises companies wishing to apply to start thinking ahead and preparing their documents such as financial reports and other documentation before hiring the necessary professionals.
“Keep in mind which auditing standards you will comply with because US and domestic exchanges have very different accounting standards,” he added.
Prepare your team
Another thing the company needs to complete apart from documents is its internal corporate governance. The team must be mature enough and aware of additional work outside of their day-to-day work.
There is a lot of work and commitment, not only in terms of registration, but to its future as a public company, says Laurent.
Get ready for public scrutiny
Laurent shares that one major difference between being a listed company from a private company is the increased public scrutiny it now targets. As companies now have to report their performance and financial projections every quarter, there will be an increase in administrative tasks, earnings reports, etc.
I see it from a mature perspective and it is a good effort for the company to become more structured, more organized and more transparent to pave the way for future growth. It also makes us remember that the IPO is not the end of the journey, but the beginning.
Laurent Junique, founder and CEO of TDCX
If you’re not up for the amount of work, don’t force an IPO unnecessarily
So according to speakers who stated that there really is no “bad time” to go public, but poor results can occur if the company and its team are not mature enough or are not prepared for the amount of effort involved in being listed on an exchange.
Some examples of these can range from listed companies that have no reported earnings, or do not achieve targeted results, and remain stagnant.
This certainly shows the fact that companies that want to go public need to have a very strong understanding of their business, how to fit in the market, supported by a strong and united team.
“So that’s why I think that companies should think about preparing for an IPO much earlier because those key areas need a lot of time to develop,” concluded Andy.
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