A beginner's guide for subscribing SG IPOs

Singapore Exchange is Asia's leading and trusted securities and derivatives market infrastructure, ‘'operating equity, fixed income, currency and commodity markets.

It is one of Asia's most international exchanges, with about 40% of listed companies and over 80% of listed bonds originating outside of Singapore.

Shares of a private company could be listed and quoted on either the Mainboard of the SGX or its Catalist board, the sponsor-supervised listing platform of the SGX.

There is a growing trend in SGX Mainboard listings in recent years which saw S$314 million in the first half of 2021 and S$619 million in the second half of 2020, according to findings in Deloitte’s mid-year review of the 2021 Singapore IPO market.

This also presents a positive outlook for large local companies considering an IPO on the local exchange.

Source: Deloitte report

1. Profitable Singapore IPO market

Earnings Performance

The performance of newly-listed companies in SGX was above expectations despite the uncertainties in the market, according to the 2020 report from PwC. Day 1 closing for nine of the newly listed companies were above IPO price, with only two below IPO price.

On a YTD 2020 (as of 18 December 2020) basis, seven of the newly listed companies traded above IPO price, two trading at IPO price and two trading below the offer price.

Source: Deloitte report

According to the 2020 report from PwC, REITs continue to pivot the local IPO market scene, and the healthcare sector continues with its strong performance.

Source: Deloitte report

There are 25 stocks listed in Singapore from 2019 to 2021H1 according to the SGX statistics. The first-day return of SG IPOs is positive:

First-day rise probability reached 76%, while the Average first-day rise % was 2.71%. The highest first-day rise company-OTS soared 30.43% in its trading debut.

(*First-day rise probability = Number of first-day risers / Number of IPOs * 100%;

Avg first-day rise % = ∑ First-day rise / Number of IPOs *100%)

2. How to participate in SG IPO Subscription

What is SG IPO Subscription

IPO provides retail investors with an opportunity to subscribe for shares/bonds of a company prior to its commencement of trading on SGX.

A Singapore IPO subscription refers to subscribing to new shares issued by the SGX. If a subscription is successful, an investor will be allotted new shares, which can be sold on the first trading day. Investors can profit from Singapore IPO subscriptions through the price difference between a stock's issue price and its market price after listing.

However, there is a risk that the price of new stock may fall below its issue price on the first trading day. You should be cautious in your investments.

How Can Investors Participate in SG IPOs?

Singapore stock IPOs employ a placement mechanism through which investment banks act as underwriters and assist companies to issue stocks.

Futu SG acquires allotment quotas from investment banks by communicating with issuing companies and then distributing the acquired allotment quotas to clients (In some cases, Futu SG may be the underwriter as well).

Issuing Mechanism

There are several phases in the IPO process:

• Preparation for IPO and Submission to the SGX:

The SGX will review the application and raise queries to the issue manager or sponsor.

• "Exposure period": Around two weeks

After listing approval has been obtained from the SGX, the prospectus will be lodged on the website of MAS OPERA (for Mainboard listing) or SGX Catalodge (for Catalist listing).

During the "exposure period", the prospectus or offer document will be available for public comment. The public could air any serious concerns they may have.

After clearing the exposure period, the company can proceed to register its prospectus and launch its offer for shares to the public.

• Share offering: Around one week

It will generally take place around one week after the launch of the offer for its shares.

• Share allotment: varies depending on underwriters

The final allotment completion and trading time will all depend on the IPO underwriters. Usually one day before the listing day, Futu SG will handle the allotment process as soon as it acquires its quota, and will inform allotted clients once the allotment process is completed.

• Listing:

The company will be listed on either the Mainboard Catalist and commence trading of its shares thereafter.

3. How to Subscribe SG IPOs

Guide to subscribe Singapore IPOs

Applying for Public Offer shares/bonds via FUTU interfaces:

Remember to check the result of the application after the balloting results are announced which is usually indicated in the IPO prospectus.

There are three methods that investors can subscribe to IPOs

4 Risk Disclosure

Although the threshold for Singapore IPO subscription is low, certain investment risks exist:

1) Uncertain allotment rate

In some circumstances, especially where an IPO is very popular or the issuer expectedly reduces the issue scale, a low or zero allotment rate is likely.

2) Price risks

Due to external factors or poor IPO quality, there is a risk that the price of new stock may fall below its issue price on the first trading day. The fall is without limit.

3) Subscription costs

The subscription fee and financing interest are payable regardless of whether the subscription is successful or not.

Disclaimer：

This advertisement has not been reviewed by the Monetary Authority of Singapore. This article is for informational purposes only. The stock market is risky and you must be cautious before entering it. Please engage in securities investment or futures trading through legal licensed securities or futures companies. This document should not be regarded as a recommendation or solicitation for the purchase or sale of securities, futures, or other financial products or services. The document provided does not take into account your investment objectives, financial situation or particular needs. It is possible that the price of new stock can fall below its issue price on the first trading day. Please participate in the subscription after you have comprehensively considered the risks.