Internet companies are turning more to backdoor listings rather than initial public offerings as a means of going public as investment banks shy away from sponsoring them in the current depressed environment. Backdoor listings can be achieved within two months while IPOs can take up to five months - during which market conditions may deteriorate. 'Backdoor listings shorten the timetable for the listing process,' said a corporate financier at an Asian brokerage. Although a backdoor listing may not initially raise funds for a company it does create the opportunity for them to quickly raise finance at a later date through a share placement when market conditions improve. 'After you have acquired listing status you can just wait for the better market to come back and then you can do fundraising,' Tai Fook Capital deputy managing director Derek Chan said. Regulations allow companies to issue up to the equivalent of 20 per cent of the company's share capital without prior notice to shareholders. Backdoor listings are easier to achieve than IPOs as shareholders of shell companies are eager to see assets injected into their flagging company as a way to increase the return on their investments. 'Backdoor listed entities are usually pretty dull companies and shareholders are usually keen to see something more interesting,' said a corporate finance director at a European investment bank. Last May shareholders in Tricom Holdings saw their shares rocket 1,200 per cent in one day after the announcement that Richard Li Tzar-kai's Pacific Century Group was taking over the company as its listed flagship. If market conditions are unfavourable for an IPO, a backdoor listing provides venture capitalists and strategic shareholders with an outlet to realise the value of their holdings.
