Dearth of money-spinning IPOs spells pay cuts and even closure of firms
By Goh Eng Yeow 27 April 2009
Boutique financial services firms which proliferated in the recent boom years are suffering a severe shake-out as the global financial crisis takes a heavy toll on their business.
The credit freeze has meant that one of the key money spinners for these firms - initial public offerings (IPOs) - has almost completely dried up this year.
In response, most of them are battening down the hatches, cutting staff pay and not replacing employees who leave - while awaiting better times.
But at least one firm has decided to bite the bullet and call it a day, while another is no longer handling IPOs.
SBI E2 Capital, which has been operating here for five years, closed down its stockbroking operations in January.
It is in the midst of also closing down its corporate finance arm which handles IPOs and does corporate advisory work for listed firms.
The firm is a continuing sponsor for Catalist - the second board established by the Singapore Exchange (SGX) for fledging firms to raise capital.
Another boutique firm - Omega Capital - is no longer an accredited issue manager, which gives firms the right to handle new listings, after it failed to renew its operating licence.
The fear among industry observers is that these two firms’ tribulations may be only the tip of the iceberg in an industry which is visibly shrinking.
A check of the Monetary Authority of Singapore (MAS) website shows that besides commercial banks, there are 36 financial firms which advise on corporate finance.
While a few are big boys like Goldman Sachs and Morgan Stanley, the majority are boutique outfits like SAC Capital, Provenance Capital and NRA Capital.
‘Nobody is making any money. The IPO market stays dead even though the stock market showed signs of reviving in the past few weeks,’ said the boss of one boutique finance outfit.
Fast evaporating revenue has meant fast dwindling numbers of industry jobs.
Since January, only two smallish IPOs - Westminster Travel and Japan Food Holdings - have made their way to the Singapore Exchange.
By contrast, in the same period last year, 11 firms were listed on the SGX and two on Catalist.
Even the IPO pipeline seems to be drying up. A check with Opera, the MAS website, shows that there are currently prospectuses from only two IPO hopefuls on display.
They are Sino Grandness Food Industry, which has not launched its IPO, even though its draft document was lodged four months ago, and Passion Holdings, whose draft prospectus was put up three weeks ago.
The market is also rife with talk that newer players, which secured stockbroking licences in recent years, may be in the process of giving them up, as the going gets rough.
‘The straitened circumstances favour the incumbent brokerages. Only they have the fat reserves to sit out the current lean periods,’ said one market observer.
Average daily stock market turnover slumped from $2.4billion in 2007 to $1.5billion last year. In the first quarter this year, it fell further to an average daily $1billion.
Unlike banks and brokerages, whose deep pockets enable them to carry their unprofitable investment banking units, boutique firms often face shareholders who are also experiencing the fallout from the credit crisis themselves.
SBI E2 Capital chairman Wong Sin Just has made no bones about it. He confirmed that his firm’s shareholders decided to shut down the operations here to focus on Hong Kong, after a business review.
‘It is a sad decision for me. Singapore is an important market for me personally. But it is obvious that they (the shareholders) are also affected by the markets.’
In its heyday, SBI E2 Capital had more than 20 employees in its stockbroking and corporate finance operations.
It now has under 10 employees as it finalises the closure of its operations here.
But Mr. Kevin Scully, chairman of NetResearch Asia, believes that while the going is tough, boutique finance firms can still thrive if ‘they have a low-cost operating structure and hand out rewards which are performance-driven’.
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Shake-out in boutique finance business
Dearth of money-spinning IPOs spells pay cuts and even closure of firms
By Goh Eng Yeow
27 April 2009
Boutique financial services firms which proliferated in the recent boom years are suffering a severe shake-out as the global financial crisis takes a heavy toll on their business.
The credit freeze has meant that one of the key money spinners for these firms - initial public offerings (IPOs) - has almost completely dried up this year.
In response, most of them are battening down the hatches, cutting staff pay and not replacing employees who leave - while awaiting better times.
But at least one firm has decided to bite the bullet and call it a day, while another is no longer handling IPOs.
SBI E2 Capital, which has been operating here for five years, closed down its stockbroking operations in January.
It is in the midst of also closing down its corporate finance arm which handles IPOs and does corporate advisory work for listed firms.
The firm is a continuing sponsor for Catalist - the second board established by the Singapore Exchange (SGX) for fledging firms to raise capital.
Another boutique firm - Omega Capital - is no longer an accredited issue manager, which gives firms the right to handle new listings, after it failed to renew its operating licence.
The fear among industry observers is that these two firms’ tribulations may be only the tip of the iceberg in an industry which is visibly shrinking.
A check of the Monetary Authority of Singapore (MAS) website shows that besides commercial banks, there are 36 financial firms which advise on corporate finance.
While a few are big boys like Goldman Sachs and Morgan Stanley, the majority are boutique outfits like SAC Capital, Provenance Capital and NRA Capital.
‘Nobody is making any money. The IPO market stays dead even though the stock market showed signs of reviving in the past few weeks,’ said the boss of one boutique finance outfit.
Fast evaporating revenue has meant fast dwindling numbers of industry jobs.
Since January, only two smallish IPOs - Westminster Travel and Japan Food Holdings - have made their way to the Singapore Exchange.
By contrast, in the same period last year, 11 firms were listed on the SGX and two on Catalist.
Even the IPO pipeline seems to be drying up. A check with Opera, the MAS website, shows that there are currently prospectuses from only two IPO hopefuls on display.
They are Sino Grandness Food Industry, which has not launched its IPO, even though its draft document was lodged four months ago, and Passion Holdings, whose draft prospectus was put up three weeks ago.
The market is also rife with talk that newer players, which secured stockbroking licences in recent years, may be in the process of giving them up, as the going gets rough.
‘The straitened circumstances favour the incumbent brokerages. Only they have the fat reserves to sit out the current lean periods,’ said one market observer.
Average daily stock market turnover slumped from $2.4billion in 2007 to $1.5billion last year. In the first quarter this year, it fell further to an average daily $1billion.
Unlike banks and brokerages, whose deep pockets enable them to carry their unprofitable investment banking units, boutique firms often face shareholders who are also experiencing the fallout from the credit crisis themselves.
SBI E2 Capital chairman Wong Sin Just has made no bones about it. He confirmed that his firm’s shareholders decided to shut down the operations here to focus on Hong Kong, after a business review.
‘It is a sad decision for me. Singapore is an important market for me personally. But it is obvious that they (the shareholders) are also affected by the markets.’
In its heyday, SBI E2 Capital had more than 20 employees in its stockbroking and corporate finance operations.
It now has under 10 employees as it finalises the closure of its operations here.
But Mr. Kevin Scully, chairman of NetResearch Asia, believes that while the going is tough, boutique finance firms can still thrive if ‘they have a low-cost operating structure and hand out rewards which are performance-driven’.
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