Tue, Sep 21, 2021 page8

• EDITORIAL: Unicorns need relaxed stock rules

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  Taiwan has been eager to hatch its own unicorns to join the ranks of global US$1billion companies.

  However, this is not happening. Gogoro Inc and Appier Group Inc, two local start-ups with the best potential to become home-grown unicorns, have pursued overseas initial public offerings (IPO) to raise funds for expansion.

  To provide easier access to the local capital market, the Taiwan Stock Exchange and Taipei Exchange in July launched two new share trading platforms — the Taiwan Innovation Board and the Pioneer Stock Board — for start-ups to trade their shares. The new boards are proving unappealing to local start-ups amid rigid regulation and a smaller market scale, setting back Taiwan’s efforts to develop unicorns.

  Electric scooter maker and battery swapping system provider Gogoro last week announced its IPO on the NASDAQ. With a valuation of US$2.35 billion, Gogoro is to become the latest local start-up joining the unicorn club. The Taoyuan-based company is set to list its shares in the US via a merger with special-purpose acquisition company (SPAC) Poema Global Holdings Corp in the first quarter of next year.

  Gogoro is to add US$550 million to its balance sheet together with a private investment in public equity, a huge and unthinkable venture for locally listed companies.

  Six months ago, Appier, an artificial intelligence software developer, raised ￥29.8 billion (US$272 million) by debuting its shares on the Tokyo Stock Exchange Mothers market, aiming to cater to its Japanese customers.

  A major reason Appier and Gogoro forwent the local stock exchange and opted for Tokyo and New York to launch IPOs was the low valuation local investors give to start-ups, given their poor financial performance in the budding stage. Making money is not the priority of such firms, and they barely generate any revenue even upon IPO launches.

  Local investors are mostly conservative and lack appetites for start-up stocks. They prefer stocks with stable returns and have a low tolerance for unprofitable companies. Foreign investors, on the other hand, have deep pockets and are more willing to bet on companies that might have excellent growth potential in the long term.

  Gogoro, 10 years old, has not yet turned a profit. Appier just swung into a monthly operating profit in June for the first time since 2013, with its gross margin improving to 50 percent from 42 percent last year.

  High qualification ceilings for investors set by the Financial Supervisory Commission could also be a factor that stops start-ups from debuting shares locally. Retail investors are restricted from investing in shares listed on the newly launched boards. Only qualified investors are allowed to buy shares listed on the new trading platforms, given the higher risks in investing in those start-ups.

  Institutional investors, or venture funds, are naturally qualified to trade those shares. Otherwise, investors interested in those start-ups are required to hold assets of NT$10 million (US$360,542) to NT$50 million, depending on their assets, experience and income.

  So far, not a single company has listed its stocks on the Taiwan Innovation Board, as it takes at least six months to complete the IPO review process. Lin BioScience Inc has pulled back its share offering plan on the board and considers trading shares of its subsidiary, Belite Bio Inc, via a traditional IPO, SPAC or on overseas stock exchanges.

  To provide a fast track to the local capital market and to revitalize local stock markets, the stock exchange regulator should consider relaxing the rules governing share listings and investor qualifications. Otherwise, Taiwan risks losing start-ups with valuable innovation and core technologies to overseas markets and should expect the fallout of a talent exodus.
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