SINGAPORE Law and Practice Contributed by: David He, Benjamin Teo, Kinnari Sahita and Binh Vong, Gunderson Dettmer Singapore LLP
6.2 IPO Exits IPO exits for Singapore start-ups have been sparse, particularly on established global exchanges such as the NASDAQ, NYSE and HKSE. Considerations that drive the timeline for an IPO include: • the profitability and creditworthiness of the company; • market conditions; • retail investors’ awareness of the company; and • the company’s growth potential. 6.3 Pre-IPO Liquidity Restrictions on Secondary Sales Most companies do not place significant restric - tions on the transfer of shares by investors, as such investors generally expect their equity in the company to be freely transferable. Howev - er, it is not uncommon for certain companies to disallow transfer of shares by investors to their direct competitors. In such cases, companies and investors may agree to a narrow definition of “competitor” which may include a specified list, updated on a periodic basis. Employee Liquidity To facilitate employee liquidity, companies occasionally implement employee liquidity pro - grammes. Such programmes may be structured as a company buyback programme funded by a third-party investor in a new financing round. In such cases, the company allocates a portion of the new funding round proceeds to redeem shares from employees who wish to sell. Alternatively, companies may facilitate the sale of employee shares through a third-party-spon - sored tender offer. Under such arrangements, eligible employees are offered the opportunity to sell their shares in the tender offer, subject to
Investors commonly require a company to use reasonable or best efforts to facilitate an exit (whether through a trade sale or secondary sale) within a number of years. It remains to be seen whether and how such rights will be enforced in practice. The general consensus is that such efforts are limited to entertaining exit opportuni - ties in good faith and providing support in the due diligence of the company’s business by an interested third-party buyer, but stop short of devoting substantial company resources or hiring a financial adviser to run a sale process. However, investors may sometimes specifically require that the company hire a financial adviser at the company’s expense to run a formal sale process upon the expiry of the exit term. Exit Triggers Events triggering exits typically include: • any sale of shares that results in a change of control of the company; • asset sales where the company disposes of all or a substantial amount of its undertakings and assets; and • public listings. Investors may require that, if the company exits via a public listing, the listing must satisfy cer - tain criteria (a “Qualified IPO” ). Common require - ments include: • that the listing be firmly underwritten and launched on a reputable securities exchange with meaningful trading liquidity; • that the gross cash proceeds from the listing exceed an agreed dollar amount; and • that the listing be priced at a certain valuation or implied market capitalisation.
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