Gogoro's US Listing: Three Questions for Taiwan's Capital Markets

On Gogoro's plan to list in the US through a special purpose acquisition company (SPAC). Let me share my personal views. Gogoro listing in America is like Chien-Ming Wang and Chin-Feng Chen taking on Major League Baseball. You would not really want to keep first-rate players like them in Taiwan. Even Shohei Ohtani and Ichiro Suzuki would not be satisfied with the Japanese market alone. Every top player wants to test themselves on the world stage. Here in Taiwan, we wish them well and look forward to outstanding performances. -- I. Starting with Taiwan's capital markets: are they ready? I have not seen Gogoro's financial statements. But market rumors suggest substantial accumulated losses. Beyond an extremely high market capitalization—NT$65 billion, considerably above FamilyMart and Simplo—are Taiwan's capital markets psychologically prepared for financial statements that might look like this? (1) Large accumulated losses: not hundreds of millions or a few billion, but possibly approaching NT$10 billion. (2) Low equity, potentially even negative, with some preferred shares initially classified as liabilities. (3) Continuing losses: even if profitability begins, when will all accumulated losses be covered? US capital markets have developed to the point where they can accept listings by companies with continuing huge losses, substantial accumulated losses from heavy early investment, or even negative equity, provided a sufficiently large prospect or dream supports them. Many Silicon Valley startups, for example, have accumulated losses exceeding US$1 billion when they list, sometimes much more. Personally, I do not think Taiwan's capital markets are psychologically ready for financial statements like these. But we can start by learning to accept high price-to-earnings multiples, price-to-sales valuation methods, and low equity. We need not expect an overnight change in mindset. Regulators, the market, and investors must learn and grow together, gradually finding an approach suited to Taiwan's capital markets. -- II. Gogoro itself: companies will choose the listing venue that suits them best. There is no need to force the issue. We should wish Taiwanese companies success in international capital markets and hope they raise more money internationally to develop in Taiwan and contribute here. If a US IPO can raise NT$15 billion while Taiwan can provide only NT$1.5 billion, of course a company will choose to raise more in America and bring it back to develop in Taiwan. If Gogoro performs better than expected, it could instead draw more international capital's attention to Taiwan and help accelerate the development of our startup ecosystem. Still, I want to raise several concerns about Gogoro itself. First, I think maintaining visibility in US capital markets requires three conditions: 1. A sufficiently large investment theme, such as payments. 2. A top-three position in a regional market, such as Southeast Asia, or a market with a sufficiently large population. 3. Sustained high growth, above 50% or 100%. 4. Attractive gross margins would be even better, above 50%. 5. A sufficiently large revenue base. A company that meets these conditions, such as Southeast Asian startup giant Grab, can attract considerable attention in US capital markets. That is where I begin to worry about Gogoro, though I hope I am worrying unnecessarily: 1. Are electric scooters an appealing enough theme? Is the potential large enough? Taiwan has the highest per-capita income among countries where motorcycles are the main means of transport. Most other such markets are lower-income emerging markets. 2. Gogoro's revenue comes mainly from Taiwan, rather than a region. It even exported its model to Europe, but that effort ended in failure when its partner Coup chose to close down. If Gogoro cannot demonstrate that its model can expand beyond Taiwan or find viable business models in different countries, acceptance in US capital markets remains to be seen. 3. Taiwanese people know Gogoro well, but outside Taiwan, mainstream international investors may be quite unfamiliar with it. 4. My greatest worry is that Gogoro's growth may already have slowed, and its figures may even have declined over the past year or two. US capital markets are unlikely to accept a startup presenting declining numbers. These are all my personal speculations, however. I hope Gogoro exceeds expectations, that much of what I have heard is wrong, and that these worries are unnecessary. I still wish Gogoro success beyond Taiwan and hope it inspires more Taiwanese startups to challenge the major leagues. -- III. Taiwan's capital-market regulators can keep an open mind and reconsider the market's current strengths and distinctive qualities. This year Taiwan produced 91APP, a startup unicorn with a US$1 billion market capitalization that stayed in Taiwan's capital markets. Returning to the point above, however, 91APP has already demonstrated its business model, reported profits in recent years, covered its early accumulated losses, and has ample cash for development. Equity is not high, but is acceptable. Revenue growth is only passable, but profits have grown severalfold and gross margins are relatively high. That is why Taiwan's capital markets can currently accept a valuation like 91APP's. Looking at Gogoro, I do not think Taiwan's capital markets are necessarily incapable of providing a high valuation. But the entire market, including investors, still needs time to learn. Many ideas cannot change overnight. Perhaps Taiwan cannot currently accommodate a highly valued US$2 billion unicorn, but it may be particularly suitable for startups valued at US$100 million to US$1 billion. Regulators could focus on these companies: understand what they need, care about, and worry about, then see whether they can help address those issues one by one and grow alongside them. We wish Taiwanese startups well when they seek capital markets better suited to their development. In return, Taiwan really needs to ask: what are our strengths and distinguishing features? Can we also attract excellent international startups to list here? For example, can Taiwan's capital markets offer enough incentives for the many promising Southeast Asian startups valued at US$100 million to US$1 billion to choose to develop here? Capital and startup markets around the world exchange freely and allow movement. We need to create the most suitable environment and retain the teams best suited to it. Beyond keeping promising startups, I think the more important question is whether Taiwan can attract other outstanding international startup teams. If more high-quality domestic and international startups choose to list here, they will attract more international capital and add momentum to the continued growth of Taiwan's capital markets. One day, we too may retain or create startups worth US$2 billion, US$3 billion, US$5 billion, or US$10 billion. --- To sum up, Taiwan's capital markets took their first step in 2021, but still have some way to go before maturity. We can keep learning and growing during this period, offering regulators more encouragement and scrutiny, and Taiwanese startups more support and good wishes. --- As a bonus, here is material from my previous post: America's and Silicon Valley's greatness comes from sufficient diversity. Why is Silicon Valley at the top of the world? Mindset, culture, and, more importantly, talent. It attracts the world's best people and capital like a magnet. At startup events or seminars in Taiwan, almost everyone you see is a local entrepreneur. Silicon Valley is completely different. You can see founders from India, Korea, Brazil, Germany, Indonesia, China, Israel, and other countries, yet often none of them grew up in America. That is because Silicon Valley has become a truly international center for entrepreneurship. Silicon Valley's greatest advantage is its appeal to talent: it brings together outstanding people from all over the world. Americans are not necessarily that smart, but they do not need to be, because today's American geniuses come from around the world. More than half of Silicon Valley's startup founders come from overseas. In Taiwan, by contrast, local entrepreneurs still dominate. My view: “Taiwanese entrepreneurs with great ambitions should spend two or three years in Silicon Valley, take part in the actual operations of a startup there, and experience the impact of a completely different culture.” Taiwan's government should also find ways to attract top talent from around the world. To adapt the words of the author of Surviving a Startup: Taiwanese people are not necessarily that smart, and they do not need to be. But Taiwan can bring the world's smartest people together here to lead Taiwan forward and create value. Then Taiwan will have world-class competitiveness. To become a great place for innovation, Taiwan should not stop people from leaving. We should even encourage them to go out, see the world, test themselves on the global stage, and give back here. What we really need is an environment and fertile ground that the world's best people are willing and eager to enter, because it suits their stage of development and provides the nourishment they need to grow.