In the Business Times on Thursday:
Backdoor listing is the flavour of the season as companies are taking the reverse takeover (RTO) route to the stock exchange instead of initial public offerings (IPOs).
In the first half of this year, the value of announced reverse takeovers (RTOs) on the Singapore Exchange surged to US$969 million – an all-time high that even exceeded the amount raised through IPOs, year-to-date.
Some US$797 million worth of RTOs were announced for the whole of last year – a record by itself – data from Dealogic shows. The first six months of the year have already surpassed this amount. The RTO trail saves time. In contrast, the IPO process involves roadshows, and lodging a prospectus which is then made publicly available on the Monetary Authority of Singapore website Opera for investors to pore over.
My comments in RED.
I have never been a fan of the RTO process and the new business that comes along with it. In my opinion, the greatest beneficiary of such arrangements are the vendors and owners of the new business. Perhaps for the long suffering shareholders, the only good thing is that they are now able to sell their shares in the open market as a result of an increase in trading volume caused by the buzz surrounding the impending RTO deal. I will dissect the numbers in the RTO recently announced by Showy International to illustrate why it is a lousy deal.