Ayondo, the first fintech listed on SGX and also probably holds the record for one of the fastest IPO to suspend itself. In March 2018, the company started trading after its IPO at $0.26 per share after approval from SGX and MAS. On the first day itself, the share price fell below its IPO price and went on a downward spiral never to recover again. In Jan 2019, the CEO then resigned after discontentment and disagreement between controlling shareholders, following which it was discovered Ayondo had accounting issues in its financials during the years leading up to its IPO. The company has since suspended itself from trading in Feb 2019- less than 1 year since it IPO’d. Ironically Ayondo is not a local company but has operations only in Europe. Why did SGX and not MAS first ponder over why the company chose Singapore as a listing place instead of European exchanges like London or Germany where its business operations were?
Then we have Sinograndness, a food and beverage company. The company is currently languishing at an extremely low price, where its valuation is at a price book value of 0.06 times and PE of 0.6. I am not kidding! However the company has many severe irregularities. Firstly the company did not announce it had defaulted on the loans it received from a Thai listed company. However the Thai Listed company had announced it on their stock exchange on 8 January 2019. Within the next few days, Sinograndess share price fell on the SGX, however the company made no announcements. It was only after 1 week plus did the company finally announce on this default; probably due to the numerous number of complaints sent to SGX by members of the public (including me) on the lack of material disclosure.
What Singapore needs are more Investigators and not Analysts
In the past few months, MAS has announced government funds has been set aside to subsidise the salaries of financial analysts and listing fees in order to boost the stock market. In my opinion, MAS is barking up the wrong tree.
The reason for the tepid stock market is because (i) companies with questionable business models are allowed to list, (ii) companies with corporate governance and (iii) accounting irregularities are largely unchecked during their time of listing on the SGX. Such companies are highly susceptible to frauds and doing massive impairments when the writing has been on the wall over the years, prior to its impairment.
Furthermore due to poor investor protection and enforcement by both SGX and MAS to the above points, this results in low quality listings in Singapore. The lack of quality listings outside the STI top 30 and known listed GLCs is causing poor valuation and liquidity. To summarise, what we need is a stronger enforcement regime in Singapore to shore up investor sentiments – MAS and SGX should be channelling funds to hire more investigators or allow its investigation unit to have more leeway to investigate companies with questionable accounting and business models that are currently listed here. This will improve investor sentiment and in turn the stock market.
The Conflict of Interest of SGX
Unlike other countries, where the authority regulating stock listings is one entity (in US, it is the SEC) while the company which runs the stock exchange is a separate entity (NASDAQ, New York Stock Exchange etc); Singapore runs on a different model where the regulator and business of running the stock exchange is the same entity – SGX.
This is an open conflict of interest. How can SGX regulate companies when they also dependent on them for revenue via allowing them to list and trade on their stock exchange. SGX would want as many companies as possible to list so as to earn more listing fees.
In my opinion, Singapore should immediately separate the function of regulating listings away from SGX. A separate entity giving it to MAS or another authority should be done as in the examples of USA (SEC) or Japan (Securities and Exchange Surveillance Commission). It is bemusing that Singapore merges both regulatory and profit functions into SGX and hopes that the SGX could enforce companies and protect investors when it has to rely on companies for their revenue.
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