Thailand’s IPO market has shown robust growth in recent years. In 2022, a total of $3.6 billion was raised on the Stock Exchange of Thailand (SET) – the highest level of funds in Southeast Asia. With an even better 2023 on the cards, lawyers share with ALB what‘s in store for capital markets work this year and what clients should look out for.
Persistent macroeconomic headwinds have continued to suppress global IPO volume as companies cautiously weather entrenched inﬂation, tightening credit conditions and fast-spreading contagions in the ﬁnancial system.
The Asia-Paciﬁc region remains the bearer of good news, dominating the fundraising landscape with 59 percent of global listings in the ﬁrst quarter. But compared to the same period last year, APAC IPO activities declined by six percent, with proceeds plummeting by 70 percent, according to EY.
Greater China’s IPO market, which has long been the engine driving the region’s IPO issuance, has been struggling to claw back its usual vigour, with wary investors weighing the sustainability of China’s bumpy economic rebound. The mainland market, although bagging more than 40 percent of all global IPO proceeds in the ﬁrst quarter, has undoubtedly seen better days.
As such, exchanges in Southeast Asia stepped in to ﬁll the void, with Indonesia outstripping Japan and Hong Kong in global IPO market share. And all eyes are also on Thailand’s IPO market, which with a total of $3.6 billion, raised the highest level of funds in Southeast Asia last year.
As of the end of February 2023, there have been 12 IPOs on the Stock Exchange of Thailand (SET) – already higher than the same period last year. With petrochemical conglomerate SCG Chemicals seeking to raise as much as $3 billion in what could be Thailand’s largest-ever IPO as soon as this year, analysts are conﬁdent that the second-largest ASEAN economy is staring at an even better year for IPOs. And coming with it are opportunities for Thailand’s capital markets lawyers to shine.
Worapan Wuttisarn, a counsel at Chandler MHM, projects a hectic year ahead, not only because of buoyant investment sentiment.
“A large number of companies are accelerating their IPO process this year in order to list their shares on the SET within next year. This is due to the requirement of the Securities and Exchange Commission of Thailand (SEC) regarding ﬁnancial statements that companies applying for IPO ﬁling in 2024 must submit annual ﬁnancial statements for the period of three previous years (as opposed to the current requirement of one previous year’s ﬁnancial statements) and the last quarterly ﬁnancial statement,” explains Worapan.
“Therefore, it is expected that there will be a great number of IPO applications submitted to the SEC within this year and the ﬁrst quarter of 2024 at the latest in order to enjoy the current requirement,” she adds.
According to the SEC, there have already been at least 75 cases in the process of pre-consultation, and 20 were under review for ﬁling or already approved. Businesses looking to ﬂoat shares in Thailand are likely to face longer preparation period under the new SEC rules.
THE ROAD AHEAD
Worapan says the updated regulations will not upend Chandler’s approach to IPO advisory because “the new Investment Promotion Strategy does not alter the fundamental privileges, but merely updates the details of certain promoted businesses,” she says.
Instead, Worapan believes that by promulgating the new regulations, the SEC intended for businesses listing on the Thai bourse to brush up on corporate governance.
“For instance, ESG is increasingly recognised and has become one of the key factors for investors’ investment decisions. Consequently, listed companies adopt sustainability management policies for the beneﬁt of their stakeholders and shareholders,” says Worapan.
“In our recent IPO cases, we have assisted our clients in preparing sustain-ability management policies as part of the IPO ﬁling. It is therefore important to keep ourselves up to date with not only the new regulatory framework but also the key global trends,” she adds.
Although the volume of IPO is expected to pick up this year with a dash for relatively easier cash before regulations tighten, Worapan doesn’t foresee much difference in deal value and sec-tors from the previous year.
“Many companies in sectors such as food and beverage have been signiﬁcantly affected by COVID-19, so their IPO plans have been delayed. Conversely, most companies in the logistics and hospital sectors have enjoyed increased revenues as a result of the pandemic environment, and we will likely see them speeding up their IPO plans,” she explains.
Looking ahead at Thailand’s IPO scene, “we have seen that technology, food and beverage, logistics, health care services, and consumer products are largely the sectors in the pipeline, while there are few in the energy and industrial sectors,” says Worapan.
Apart from the SET – the dominant IPO cradle in Southeast Asia in terms of accumulated raised funds – an alter-native fundraising venue has emerged. LiVE Exchange (LiVEx), a new bourse targeting small and medium-sized enterprises and start-ups with greater funding ﬂexibility, has been mustering traction.
As a result, Chandler MHM has been stepping up to ﬁll the compliance knowledge gap, which proves not too onerous as “the IPO and listing requirements on LiVEx are more relaxed and mainly rely on a disclosure basis,” says Worapan.
But she cautions against overoptimism, and one way to stay on top of the fast-changing regulatory environment is to keep track of the development of regulatory frameworks. “[This] will help to anticipate major hurdles of IPO work and to understand the SEC’s focus in relation to our work for the pre-IPO process or post-IPO requirements,” she says.
As the economic tides continue to shift with a general election disrupting political winds, the path ahead in Thai-land’s fundraising scene is not without hurdles.
“Considering the government election in May, the volume of IPO applications this year, and the economic growth in other markets, it is likely that Thailand’s IPO market will face intense competition domestically and regionally,” says Worapan.