FTX collapse: Why do firms invest in early stage companies in emerging sectors?
SINGAPORE: When it comes to investing in early stage companies, there are no high returns without the high risks involved, analysts told CNA after the collapse of cryptocurrency exchange FTX.FTX started bankruptcy proceedings in the United States on Nov 11, with founder and chief executive officer Sam Bankman-Fried resigning his post.
The cryptocurrency exchange owes its 50 biggest creditors nearly US$3.1 billion (S$4.28 billion). About 1 million customers and investors were left in a lurch, including Singapore state investment firm Temasek, which said it would write down its US$275 million investment, Tiger Global Management and the Ontario Teachers’ Pension Plan, which also wrote off its investment.“As with all investments, risks are inherent,” said Professor Lawrence Loh, director of National University of Singapore (NUS) Business School’s Centre for Governance and Sustainability.“Investing entities may need to get their feet wet in early stage companies to better understand the market trends and platform technologies – digital assets represent a most complex setting where there may be potential for game-changing innovations to drive economies and businesses."Economist Walter Theseira, an associate professor at the Singapore University of Social Sciences, told CNA that “there are no high returns without high risks in early stage investing”.“Up till the collapse of FTX and other cryptocurrency firms, the question that would have been posed to Temasek, if they had never invested, would have been: 'Why aren't you investing in this high return space?'"With the benefit of hindsight, the question is now: 'Why did you invest in this high-risk space?'"Assoc Prof Theseira added that these are essentially the same question –
