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OTC Capital
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zhuge_liang
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08-Feb-2007 14:15
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When Harry's Bar -- the bar made famous by Barings' rogue trader Nick Leeson -- decided to raise money, it did not head for the bourse but chose a small, novel market: OTC Capital. Set up last August by Singapore broker Phillip Securities, OTC Capital has stolen a march on SGX in introducing a fund raising platform for young companies. Akin to London's Alternative Investment Market (AIM) or Taiwan's Pre Listing market, OTC Capital allows firms to raise money cheaply without too much regulation. "There are more onerous requirements to list on the SGX. You need a prospectus, more details and responsibilities from the professionals who manage the listing," Loh Hoon Sun, managing director of Phillip Securities, told Reuters in an interview. Besides Harry's, the only other company listed on OTC Capital is Global Roam, an information technology firm which raised $2.4 million in August and now has a market value of $10 million. Phillip Capital, which acts as a market maker on OTC Capital, is talking to a handful of other companies about listing and aims to have 10 or so by year-end. Loh said that lower cost, less regulation and a faster listing are the main advantages of OTC Capital. Harry's raised $3.3 million from its public offer at a cost of about $200,000. That's considerably less than the estimated $1.1 million it would have had to pay in various fees to get a listing on the SGX's Sesdaq board for small firms, Harry's CEO Mohan Mulani told Reuters. "We had some investors whom we know and they wanted us to list. It cost a lot less to go on this platform," said Mulani. Under Singapore rules, fund raising below $5 million does not require a company to issue a prospectus, a lengthy and costly process involving accountants, lawyers and financial advisers. It took Global Roam just 3.5 months and cost $170,000 to get listed on OTC Capital. For the SGX, preparation for a listing can take up to a year. "The onus of getting it right comes at a cost and that is reflected in the professional fees," said Choo Chee Kong, CEO of boutique brokerage Westcomb Financial Group . "Accountants make more money than the listing manager these days," said Choo, adding that accounting fees to prepare a company for listing on the SGX typically exceed $500,000. The Singapore Exchanges has been mulling an alternative fund-raising platform for start-ups since August 2005. A Singapore banker said an SGX proposal was with regulators, whose main concern is whether local investors are sophisticated enough to evaluate the higher risks associated with OCT trading. "We are just finishing the feasibility study and now revising and finalising the business model for an alternative fund-raising platform," said Magdalyn Liew, an SGX spokeswoman, adding that the SGX should be ready to make an announcement by March. Bankers say OTC Capital has several limitations, chief of which is a lack of liquidity. OTC Capital cannot advertise or allow trading of its companies openly. Investors who want to trade have to register with Phillip Capital first. It now has 1,000 registered members, Loh said, but he hopes to have 100,000 eventually. "We pretty much had to get our own investors. It is more like private equity. Our investors wanted at least to have a valuation and be able to trade if they needed to," said Mulani, adding that Harry's would consider getting on the SGX in the future. |
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Nostradamus
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23-Sep-2006 20:59
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To trade in OTC stocks, must open a Poems account. Brokerage charges are similar to SGX stocks. More details at: http://www.otccapital.com |
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Nostradamus
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23-Sep-2006 20:44
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Another 4 companies are in the advanced stage of preparation. One of them is likely to trade its shares in mid-Nov. But smaller and medium-sized companies aiming to list on OTC must improve their corporate governance. There should be greater disclosure from these companies, with stronger financial statements. The progress of the OTC facility will be monitored by all players in the market, partly because SGX is mulling over plans to launh its own version, modelled on the London Stock Exchange's Alternative Investment Market (AIM). |
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Nostradamus
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23-Sep-2006 20:34
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Phillip Securities has pressed ahead with its own trading platform for unlisted fledging firms to raise funds in July. After a somewhat slow start, OTC Capital, which allows over-the-counter trading of shares of smaller unlisted firms, is gaining momentum. It aims to catch high-growth success stories of young startups. Yahoo and Google spring to mind. Venture is another success story. It made a disappointing debut on Sesdaq in Apr 92. However, a $10k investment in the outset would have blossomed to $600k now. The response to the first issue - GlobalRoam, an Internet telephony company - has been promising. GlobalRoam's listing didn't require a prospectus and expenses of $170k is a small fraction of what it would hae cost it to get a Sesdaq lsiting. $2.4m was raised. There's less hassle and the trading liquidity is there. But the Phillip model requires investors to be "pre-qualified" by signing an undertaking to express an interest in investing in start-ups. Only a few million dollars can be raised. For SGX's third board to succeed, it must be able to reach out to all investors without such pre-qualifications and restriction. |
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