Corporate Financing and IPO Channels
Businesses face multiple challenges at different stages of development, including product shortages, industry competition, rising labor costs, and increasing rental expenses. To overcome capital constraints, companies need to systematically connect with diversified external capital markets in addition to relying on traditional sources such as the founder’s personal savings, operating cash flow, supplier credit, loans from family and friends, and bank financing.
Major External Financing Channels in Singapore
When seeking external financing, Singapore businesses can generally choose from the following types of investors and capital platforms:
High Net Worth Individuals (HNWIs): Investment decisions are made quickly and are highly relationship-driven. Investment amounts are typically below SGD 1 million, although valuation methods may not always be highly professional.
Family Offices: These investors leverage family industry experience while seeking diversified investment opportunities. As of the end of 2024, Singapore had more than 2,000 single-family offices established in the country, representing growth of more than 40% from the previous year. Their investments are generally below SGD 5 million. They can make decisions quickly and provide valuable industry resources to businesses, but often require a clearly defined exit strategy.
Venture Capital Funds (VCs): Focused on early-stage, high-risk projects, with investment amounts typically below SGD 5 million. VCs have professional valuation systems and a high tolerance for risk, but they are highly demanding regarding business prospects and generally operate within fixed investment periods.
Private Equity (PE): Focused on mid-to-late-stage and medium-to-high-risk projects, with investment amounts generally ranging from SGD 5 million to SGD 20 million. PE firms can help businesses grow through professional management expertise, but they also impose strict exit requirements and investment-period constraints.
Corporate Investors: Focused on long-term, medium- to low-risk investments, with investment amounts generally ranging from SGD 5 million to SGD 20 million. Their advantages include the absence of strong exit pressure and the ability to provide strategic business resources and capabilities. However, they may become involved in the management and development decisions of the investee company.
Emerging Financing Channels: These include Convertible Bonds, Cryptocurrency, and Crowdfunding, among others.
Securities Markets and Initial Public Offering (IPO)
The securities market provides businesses with a permanent platform for public financing. It not only has no fixed upper limit on the amount of financing that can be raised, but can also significantly enhance a company’s visibility, regulatory transparency, and ability to attract talent.
Common listing destinations for companies include the Singapore Exchange (SGX) Mainboard and Catalist, the Hong Kong Stock Exchange, the U.S. Nasdaq, and Bursa Malaysia.
The standard IPO decision-making process generally includes:
Determining the listing venue → Appointing investment banks and professional advisers → Preparing the prospectus → Submitting the application for exchange review → Conducting investor roadshows → Completing the listing and public offering.
Example of Changes in Shareholding Structure
For example, if the founder originally holds 100 shares (100% ownership) in Company A, and the company issues 25 new shares to public investors at the time of its IPO, the founder will still hold 100 shares after the listing, but their ownership percentage will decrease to:
100 ÷ (100 + 25) = 80%
Public investors will therefore hold:
25 ÷ (100 + 25) = 20%
Comparison of the Advantages and Disadvantages of Going Public
| Dimension | Main Advantages | Main Challenges |
|---|---|---|
| Corporate Governance & Flexibility | Greater valuation transparency; shares can be used as collateral for financing; increased visibility can help business expansion | Loss of business privacy; regulatory requirements constrain company management and can lengthen decision-making and approval processes |
| Capital & Cost Expenditure | Provides a permanent financing platform and allows the company to conduct additional market-based fundraising multiple times | Maintaining a public listing requires substantial ongoing audit, legal, and independent-director expenses |
Companies should consider their stage of development, the urgency of their funding requirements, and their willingness to give up equity and management control. By appropriately combining private capital with public-market instruments, companies can develop a financing pathway that best matches their strategic objectives.
Disclaimer
All materials and contents found on this site are strictly for general circulation and informational purposes only and should not be considered an offer or solicitation to deal in any of the products/services found or identified on this site.
While JIC Capital Pte Ltd has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies, and typographical errors. Any opinion or estimate contained in this report is made on a general basis, and neither JIC Capital Pte Ltd nor any of its agents has taken into consideration, or conducted any investigation into, the investment objectives, financial situation, or particular needs of any user or reader, or any specific person or group of persons.