HOCK LOCK SIEW

Look beyond pedigree names that burnish young firms

THE year is 2018 and whether it's shares they're selling or digital tokens, the companies seeking public financing are getting younger and younger.

Synagie Corp, the newest debutante on the Catalist board of the Singapore Exchange, was founded in 2014, launched the first version of its e-commerce platform in August 2016, and is now public two years to that date.

Many more earlier-stage ventures have raised money through initial coin offerings (ICOs), no-frills affairs that avoid the bark of the securities watchdog so long as the coins issued work like pre-paid vouchers or "utility tokens" instead of true securities that give punters a right to participate in returns from the groups' assets.

When such outfits with little or no track record want to be taken seriously, one way to quickly establish credibility is to be associated with credible folk.

So here we are at a rather thrilling moment in time where some bigwigs of Singapore's corporate aristocracy are being recast as ambassadors of a new digital age.

One example is Lim How Teck, chairman of Heliconia Capital Management and a former chief financial officer of Neptune Orient Lines, who is featured on the website of Global Crypto Offering Exchange (GCOX) as a "notable private investor".

GCOX's mission is "to bring business fundamentals to the world of blockchain". It plans to achieve this by creating the world's first blockchain-powered platform that allows the popularity of celebrities to be "tokenised" and listed, thereby "immortalis(ing) popularity and stardom", which are otherwise volatile, it explains.

Public sales of so-called "acclaim tokens" are ongoing. The idea is that fans who buy these tokens will eventually be able to swap them for "celebrity tokens" that confer privileged access to their idols.

Other GCOX backers include boxing champ Manny Pacquiao, former England striker Michael Owen and Tommie Goh, who founded Singapore's JIT Holdings. Mr Lim is also on GCOX's governance advisory board. In Singapore, GCOX tokens can only be sold to accredited investors, chief executive Jeffrey Lin said.

The practice of organisations using prominent public figures as window-dressing is not new. Such personality pitches are best taken with a pinch of salt.

It's actually not difficult to get people to be your shareholders if you give out free shares, one industry watcher told The Business Times. So note the difference between investors and shareholders.

In Mr Lim's case, he did receive free shares, though he also bought more shares with his own money, he told BT: "They looked for me, because I have a certain profile... I invest mostly my time. I'm an adviser and investor. This is something new, you don't put your whole fortune in it."

By putting his name out there as a willing crypto-backer, Mr Lim also encourages other blockchain startups to come to him with ideas, creating a line of passive dealflow.

The same can't be said for investors in utility tokens, who get zero equity and are more like a guaranteed customer base for a product that has not been tried and tested.

One corporate bigwig put it this way: "I invest in companies, not ICOs."

However, that's not stopped one of the entrepreneurs he's funded from veering off into an ICO.

ICO legal advisers are not gatekeepers either. Whatever their pedigree, lawyers paid to advise issuers on their ICOs are not required to vet or vouch for their business models. They can only be expected to act within their terms of reference, no more.

Fake news

The worldwide fixation with investing pedigree and name recognition gets more attention than it should. And it can swing both ways.

Recently, Beijing-based Bitmain, which sells supercomputing hardware and operates two of the world's largest bitcoin mining pools, became a subject of controversy after media reports named Softbank, Tencent, GIC and Temasek Holdings as investors in its US$400 million pre-IPO round led by Sequoia Capital China.

Bitmain is expected to file for an initial public offering (IPO) in Hong Kong this month.

Reports swiftly followed where Tencent and Softbank denied involvement. Temasek took the rare step of clarifying in a public statement that it has never had discussions with or invested in Bitmain. GIC also told BT that it is not an investor.

The source of the fake news remains unknown, but to be clear, here are two true facts. EDBI, the investment arm of Singapore's Economic Development Board, is an investor in Bitmain. Pavilion Capital Fund Holdings, an independent subsidiary of Temasek, also owns a tiny stake.

When you think about it, this whole fiasco is all rather silly because the truth will be out as soon as the IPO filings are made. Besides, there are many more crucial factors that determine the success of big stock flotations other than who the issuer's early investors were.

Just look at Razer, which had a cap table that read like a Who's Who of corporate Singapore. The gaming tech firm trades underwater from its IPO, but its early backers enjoy a different return for their risk.

Knowledge of a company's backers is important as a matter of due diligence, but over-emphasis is foolish and unproductive. Founders, update your playbook.