SANTA CLARA, Calif. Silicon Valley executives are taking a close look at Taiwan's stock markets as a place for raising capital to fuel their growth given the tight U.S. venture capital and public markets.
More than 200 people attended a seminar here Tuesday (July 21) hosted by Taiwan's two exchanges. The program included a talk from Array Networks, a Silicon Valley software company that in May became the first foreign firm to list in Taiwan as well as representatives of Taiwan's Executive Yuan and its stock exchanges.
As many as ten electronics companies are working with underwriters on a possible listing in Taiwan, according to Daung-Yen Lu, chairman of GreTai Securities Market, Taiwan's over-the-counter stock market. A total of 17 foreign companies are preparing to list in Taiwan which opened its markets to foreign based companies a year ago.
As many as 370 of the 446 companies listed on Taiwan's main exchange are considered high tech firms, about a quarter of them involved in semiconductors. Listing in Taiwan is significantly less expensive than on the Nasdaq and price/earnings ratios can be as high as those in exchanges in Korea, Hong Kong or Singapore, Lu said.
In a video interview, Michael Zhao, chief executive of Array (Milpitas, Calif.), said GreTai was the best alternative for his company given its expanding customer base in China and its ties to the island nation. Array's investors include the Industrial Technology Research Institute, an R&D arm of the Taiwan government, and HQ Asia Pacific.
Array is in the midst of a six-month initiation process on the Taiwan exchange. Zhao said he hopes the listing can raise as much as $25 to bolster the company's R&D efforts.
Underwriters and executives at the Tuesday event said the Taiwan exchanges have been relatively stable in the current recession and appear to be good avenues for raising capital. The opportunity is particularly suited for small to medium companies with annual revenues ranging from $20-$100 million that would have difficulty making a strong showing on markets such as Nasdaq.
Representatives from Array cautioned that a company ideally should have an off-shore home to ease the process and avoid high U.S. capital gains taxes. In addition, prospects should be able to support the minimum NT$10 share price Taiwan requires.
The upside of the market, said Zhao of Array, is that it is a good springboard to business in China—which is not yet open to foreign listers. It also has a pool of investors familiar with the electronics business and willing to trade in smaller companies.
Venture capitalists attending the Tuesday seminar said they want to see more details about the Taiwan exchanges and tax policies to evaluate the opportunity. However it's clear money is tight in the U.S. VCs here face an historic decline in opportunities for their startups to be sold or go public.
Taiwan's stock markets are "an option people need to look at," said Jodi Shelton, president of the Global Semiconductor Alliance that helped organize the Tuesday seminar. She called the decline in semiconductor venture financing "disturbing."
"There clearly seems to be a shift--maybe it's a permanent shift and a change in the industry," said Shelton. "We think there will just end up being a different type of innovation cycle," she added
The GSA has been working the issue on several fronts, getting its members in front of Wall Street investment firms and reaching out to new sources of financing in Europe and Asia, including the growing Taiwan market.