Strategic initiatives pursued by some Asian stock exchanges reveal a market vacuum and corresponding opportunity: No bourse has yet emerged as a clear regional leader in terms of listing new-age technology companies. And amidst the tech investment rout of the past few years, there is a perceived glut of a venture-backed companies in need of new exit options.

Singapore has received most of the attention on this front, having earmarked SGD 5bn (USD 3.7bn) last month for fund managers targeting the Singapore Exchange (SGX) for portfolio company IPOs. This is part of a broader, significantly tech-oriented agenda, including efforts to open access to small-cap companies, bring in family office money, and ramp up investor education.

Last March, Tokyo Stock Exchange (TSE) established its “Asia Startup Hub” to attract regional tech companies; an initial shortlist of candidates was identified as of October.

According to the latest figures from the World Federation of Exchanges (WFE), Japan Exchange Group (JPX), the operator of TSE, hosts about 4,000 companies, but only six are foreign. That is the lowest ratio of any major bourse globally. Separate measures are in place to rationalise the number of domestic representatives, rooting out the less efficient and less attractive laggards.

Taiwan Stock Exchange (TWSE) upped the ante in January, removing all restrictions related to qualified investor status on the Taiwan Innovation Board (TIB).

Launched in 2021, TIB was initially limited to about 300,000 institutional investors with substantial trading experience and financial assets. Under the new framework, around 13m retail account holders can invest in pre-profit start-ups.

“The recent upgrades to the TIB are a game changer. By opening the platform to all investors, we’re significantly boosting its appeal. More investors means greater exposure for Taiwan’s innovative enterprises and emerging industries,” said Sherman Lin, chairman and CEO of TWSE. “TIB is not just a listing platform – it’s a bridge between venture capital and capital markets.”

Pitching unicorns

TWSE is striking while the iron is fairly hot in terms of trading performance in recent years. By the end of 2023, the exchange ranked 11th globally in daily turnover value.

Meanwhile, a recent survey by PwC found that 34.8% of local start-ups preferred TIB as a potential listing destination in 2024, up from 22.8% in 2023. This was the best showing for a tech platform in Taiwan, with the Emerging Stock Board and Go Incubation Board of Taipei Exchange (TPEx) on 24.7% and 19.1%, respectively. Still, TIB has only floated about 20 companies to date.

Much of the plan is about keeping the best local start-ups at home. The feasibility for this was demonstrated as early as 2021, when omnichannel commerce services provider 91App, sometimes called Taiwan’s first homegrown unicorn, achieved a bumper IPO on TPEx and continued to thrive.

91App hardly set the tone, however. Its IPO coincided with advertising technology provider Appier – the recipient of USD 160m in VC funding – choosing TSE. The following year, electric scooter company Gogoro, which raised some USD 680m in VC funding, opted for a NASDAQ listing via a special purpose acquisition company (SPAC) merger.

KKday, a VC-backed travel services provider that has long sought to go public, is one TWSE would like to convince. The company put IPO ambitions on ice during the travel disruptions of the pandemic, but with operations rebounding nicely in the intervening years, all eyes are on an inevitable reboot of those plans.

TSE is broadly considered the frontrunner in the bid to attract KKday, especially given the company’s extensive operational footprint and investor network in Japan. Both TWSE and TSE have reached out directly to the company, and the US is of interest, according to a source close to the situation. But all three options have their pros and cons.

The source cited significant deterrents in the form of tedious bureaucratic hurdles for foreign companies listing in Japan and a large size requirement for getting traction in the US. The source added that KKday was “not quite” at the USD 3bn valuation mark generally seen as necessary to make a splash on NASDAQ.

As for TWSE, the hope is that the new upgrades will channel the healthy liquidity of the mainboard – much of which is driven by tech-conscious retail investors – into TIB. But the connection is yet to be proven.

“It certainly warrants a closer look to see how this plays out. The company is open minded about the opportunities in Taiwan. If Taiwan can get its story right and align with investors, the market is very liquid and could get a higher valuation than many other markets out there,” the source said.

“Having said that, the TIB is very new. How will investors perceive it? What other companies are going to be part of it and build its image?”

One of the key concerns is that lowering the restrictions on the types of companies that can list and eliminating restrictions on the types of investors who can participate is a potentially explosive recipe.

User friendly

From the VC perspective, much of the risk is in the idea that the market could be flooded with tiny IPOs that will not be on the radar of institutional investors and therefore trade poorly. VC firms will exit prematurely and see limited returns. This view is balanced by the appeal of a new exit route opening at a time when exits are otherwise scarce.

Taipei-based AppWorks Ventures, an early backer of 91App and KKday, is a proponent of TIB and has partnered with TWSE to market the platform in Southeast Asia. Sophie Chiu, a principal at the VC firm, points to advantages such as zero red tape around foreign companies listing in Taiwan, the highest concentration of technology stocks in Asia, and the highest price-to-earnings ratio in Asia.

“It [the TIB upgrade] demonstrates the regulator’s strong will to make TWSE more competitive and a listing choice for these new kinds of companies, not just in Taiwan but across the region,” Chiu said.

“It means they’re throwing away the traditional type of mentality of being overly strict and protective. It’s more market driven now. Any equity market takes decades to build. So, yes, we can wait for SGX to improve, but what about VCs’ current portfolios?”

Asked to cite the key differentiator between TIB and other Asian start-up boards, Lin referred to its equivalent status to the TWSE mainboard.

It speaks to the psychology and perception issues holding back start-up boards across the region. The idea is that companies on the likes of TSE’s Mothers board or Korea Exchange’s KOSDAQ must graduate to their respective mainboards before they can be roundly viewed as top-performing stocks.

“Investors know that companies listed on NASDAQ and NYSE [New York Stock Exchange] have different growth profiles and different features but not necessarily different levels of quality,” Lin said. “We want TWSE and TIB to be like that – different growth profiles but on the same tier.”