Saved by penny stocks: Catalist listings boost extremely sluggish IPO market

Total IPO offer size was halved in 2014.

Quantity trumps quality when it comes to IPO listings on the local bourse. A report by the Small and Middle Capitalisation Companies Association (SMCCA) revealed that while the number of IPOs on the SGX have ticked up, this increase was driven small Catalist listings instead of the more substantial mainboard listings.

The report showed that in terms of the number of IPOs, the SGX is on an uptrend from a low of 19 in 2011 to 27 in 2014.

However, in terms of total IPO offer size, the SGX hit a low of $3.2 billion in 2014. This is almost half the $6.48b raised in 2013.

Catalist IPOs raised $305.7m in 2014, up from $253.2m in 2013. REITs and business trust continued to be the biggest fundraisers in the mainboard, but the SMCCA report stated that this does not indicate a healthy market.

“One important measure of the health of the Stock Market is the number of IPOs and Total Offer Size raised for the year. This not only creates a wealth effect for investors who make money from trading the IPO but also increases the number of potential equities in the Stock Market to invest in. Looking in detail, we see a significant amount in terms of Offer Size of the IPOs raised in the last few years to be from REITs or Business Trusts. While this has been an attractive asset class for certain investors, these instruments are also not exactly equities. So if one separates out the REITs and Business Trusts, our IPO market over the last few years has not been healthy,” said SMCCA President Tan Choon Wee.