Singapore IPOs: Why I No Longer Cover Every Listing

Some readers may have noticed that I have not been writing about every Singapore IPO since last year.

The simple reason is that life has become busier.

Between my day job, an increasingly packed travel schedule, family commitments and desire to play more golf, I have become much more selective about how I spend my time. 

Writing detailed IPO reviews takes time — reading prospectuses, analysing financials, comparing valuations and understanding the competitive landscape.

While I still enjoy investing and writing, I no longer feel the need to cover every IPO that comes to market.

Instead, going forward, I will probably focus only on IPOs where I am seriously considering investing my own money or where there is something particularly interesting that is worth discussing.

I suspect this will make the blog more useful as well. Rather than writing about every deal, I can spend more time sharing my thoughts on the handful that I believe deserve attention.

That brings me to the recent crop of Singapore IPOs.

A Tough Market For New Listings

The overall performance of many recent Singapore listings has been rather disappointing.

Source: Shareinvestor.com

While there have been a few bright spots, many IPOs have struggled to hold their issue prices once trading begins. In some cases, investors who subscribed enthusiastically during the IPO have found themselves sitting on losses within days or weeks of listing.

This reflects a few realities.

1. Quality of listings is lacking - if you look at the companies listed so far, I would say the quality is mixed
2. Local investors have more options - why play local when the world is your oyster. We are talking about the US, Europe, Hong Kong (proxy to China) and Japan
3. Most IPOs tanked after listing

The days when investors would blindly chase every IPO appear to be behind us for a long while now.

The JustCo Example

A recent example is JustCo. I was offered the chance to subscribe for the IPO.

On paper, the company appeared to have many ingredients that would typically attract investor attention. It had established operations across Asia, a recognised brand, improving financial performance and an impressive list of shareholders and cornerstone investors.

The IPO marketing highlighted participation from several well-known institutional investors. For many retail investors, that alone can create confidence that the IPO is worth subscribing for.

However, investing is ultimately about valuation, not shareholder pedigree.

The company has built a strong regional co-working platform and has demonstrated resilience through a difficult operating environment.

The issue, in my view, was the business model and pricing.

Offering short term rental while locked into long term leases sounded like a mis-match to me even though working from home arrangements are driving some of the tail winds. The industry has low competitive barriers and new entrants can join the party easily.

The IPO appeared to leave very little upside for public market investors. Expectations were already high, and investors were being asked to pay a valuation that assumed much of the future success was already reflected in the share price.

The market's verdict after listing was fairly swift. Despite the strong investor roster and heavily marketed offering, the stock traded below its IPO price shortly after listing.

This does not necessarily mean that JustCo is a bad company.

Far from it.

A good company can still be a poor investment if investors overpay for it.

Conversely, an average company can sometimes turn out to be an excellent investment if purchased at the right valuation.

That distinction is one that IPO investors often overlook.

Blue-Chip Investors Are Not An Investment Thesis

One of the most common mistakes retail investors make during IPO season is to place too much emphasis on who else is investing.

When investors see sovereign wealth funds, private equity firms, family offices or large institutions participating in a deal, there is a natural tendency to assume that the investment must be attractive.

Unfortunately, investing is rarely that simple.

Institutional investors often have very different objectives from retail investors. They may have invested at lower prices in earlier funding rounds. They may have strategic reasons for participating. They may have longer investment horizons or different return requirements.

The presence of blue-chip investors is certainly a positive signal.

But it should never replace independent analysis.

An investment should make sense based on the business, the valuation and the expected future returns — not simply because a famous investor happens to be involved.

What I Look For Now

As IPO activity begins to pick up again in Singapore, my focus has become much narrower.

I am looking for:

• Reasonable valuations relative to growth prospects.
• Businesses with genuine competitive advantages.
• Strong cash generation rather than adjusted earnings metrics.
• Management teams with a demonstrated track record of execution.
• Sufficient upside relative to downside risk.
• I can flip out on day 1 if I choose to do so and stay invested if market is not so conducive

Most importantly, I want to see a valuation that allows public market investors to participate in future growth rather than paying upfront for all of it.

That sounds obvious, but it is remarkable how many IPOs fail this basic test.

Final Thoughts

The return of IPO activity is a positive sign for Singapore's capital markets.

A healthy IPO market gives companies access to growth capital and provides investors with opportunities to participate in promising businesses.

However, not every IPO deserves our money.

The lesson from many recent listings is that a good company does not automatically make a good investment.

Price matters.

Valuation matters.

Expectations matter.

As for me, I'll continue writing about IPOs from time to time, but only when something genuinely catches my attention or when I am willing to put my own money behind the idea.

Life is too short to read every prospectus.

I'd rather spend that time travelling, enjoying a good meal with family and friends, playing a round of golf, or simply doing nothing at all.

And perhaps that's not a bad investment either.