Defining Beyond Business

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Taiwan IPO

There are two securities exchanges in Taiwan. Taiwan Stock Exchange Corporation (“TWSE”) is the main board of listing and trading stocks of established public companies with larger market capitalisation and scale of operation. Taipei Exchange (“TPEX”, formerly known as GreTai Securities Market) is a secondary board of listing and trading securities of public companies with smaller market capitalisation and higher growth potential, and also administers the Emerging Stock Market, an over-the-counter stock trading platform for smaller public companies prior to IPO listing on TPEX or TWSE.

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Comparing with other stock exchanges in neighbouring jurisdictions, the Taiwanese capital market (including TWSE and TPEX) has the following characteristics, making it an attractive venue for IPO:2

  1. higher annual P/E ratio than Hong Kong and Singapore and on par with Korea and Shanghai;
  2. higher annual yield (4% for 2016);
  3. special focus on high-tech and manufacturing sectors, thanks to a robust local community of supply chain and sophisticated investors;
  4. lower threshold for market capitalisation and business scale;
  5. regulator’s continuing efforts to improve the corporate governance of public companies; and
  6. relatively low cost of raising capital through IPO and secondary offerings.

IPO for foreign companies

FSC issues the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers (the “Foreign Issuer Regulation”) also pursuant to Article 22 of the Act. The Foreign Issuer Regulation was amended in December 2008 to permit foreign companies to apply for IPO listing in Taiwan. Integrated Memory Logic Limited, a Cayman Islands exempted company, became the first foreign company conducting IPO and listing on TWSE on May 18, 2010.

There are several key differences for the IPO process of a foreign company:

  • First, a foreign company seeking IPO or registration on the Emerging Stock Market should amend its articles of association in accordance with the “Foreign Issuer Shareholders Protection Checklist” of TWSE / TPEX to the extent permitted under the laws of its incorporating jurisdiction, which is a long list of mandatory provisions in the Company Act and securities regulations of Taiwan.
  • Second, if a foreign company is the first one from its incorporating jurisdiction seeking IPO in Taiwan, then it is also required to prepare an application for exemption from certain securities regulations under the Act (“Foreign Issuer Exemption Application”), in which the foreign company’s counsel must identify all mandatory provisions in the laws of the incorporating jurisdiction which would trump the corporate governance regulations under the Act and apply for exemption.
  • Third, registration on the Emerging Stock Market for trading is optional – a foreign company is only required to have a minimum of a six-month counselling engagement with the Recommending Firms to become eligible for IPO listing.
  • Finally, if a foreign company decides to file for IPO listing directly, the timing of its first public registration filing with FSC is after receiving the listing approval from TWSE / TPEX.6

ACE Market

The ACE Market which stands for ‘Access, Certainty, Efficiency’ is actually the new name for the formerly known MESDAQ (Malaysian Exchange of Securities Dealing and Automated Quotation) market. MESDAQ came into existence in 1997 when it was the home of mainly technological stocks and today it is replaced by the ACE Market under Bursa Malaysia. The ACE Market was derived together with the unification of the Main and Second Board into the Main Market of Bursa Malaysia in 2009.

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The ACE Market is seen as the ideal market for start-ups and new companies which are run by entrepreneurs who are looking to push for more capital by listing their companies public. This is where they might not have the large and high amount like companies in the Main Market but would probably have a strong product or service portfolio which if given more capital, would surely succeed.

Easier Rules in getting listed

The regulatory framework of the ACE Market is to offer companies and entrepreneurs with better transparency and hence makes it easier to list. Such is the objective of this market where the whole idea is to encourage more innovative products and companies to push for development and growth. Entrepreneurs would be encouraged to offer better products and services where there is now an option o try and inject more capital into their company for the development of their offerings. This in return will provide investors with the opportunity to start investing in SMEs (small and medium enterprises) which might not be technology based.

LEAP Market

LEAP Market is an alternative platform for SMEs and companies to raise fund. It brings together potential SMEs and companies, intermediaries and qualified Sophisticated Investors onto a single platform to create a conducive marketplace for fund raising.

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LEAP Market is a new market offered by Bursa Malaysia which aims to:

  • provide SMEs and other companies with greater fund raising access and visibility via the capital market; and
  • be accessible only to sophisticated investors *

* as prescribed under the Capital Markets and Services Act 2007

The LEAP Market aims to bring together potential issuers, intermediaries and Sophisticated Investors onto a new platform to create a conducive marketplace for fund raising. The LEAP Market provides an efficient and transparent capital formation and price discovery mechanisms compared to private market. Sophisticated Investors can now have greater opportunities to participate in the growth of SMEs in Malaysia.

The establishment of the LEAP Market is premised on the following key guiding principles:

  • Cost-efficient fund raising & listing
  • Appropriate rules and regulation based on intended SMEs and companies
  • Qualified Market for Sophisticated Investors

Disclaimer

The LEAP Market is aimed at facilitating access to the capital market by small and medium sized enterprises (“SMEs”) to which a higher investment risk may be attached. This market is a qualified market meant for sophisticated investors only, i.e. those who qualify under Part I of Schedules 6 and 7 of the Capital Markets and Services Act 2007 (“CMSA”). The issue or offer of securities on the LEAP Market is based on an information memorandum, and not a full prospectus registered with the Securities Commission Malaysia under section 233 of the CMSA. In the LEAP Market, sophisticated investors will have the full responsibility for evaluating the disclosed information, as well as the merits and risks of investing.

Risk Disclosure for Investor