When a Company Goes Public
By: Paulus Khierawan
The rapidly growing business sector has led to fierce competition among entrepreneurs. Many entrepreneurs think that turning their company into a listed company would lift the company’s reputation. Well, that’s not entirely wrong because in reality the best companies in Indonesia are mostly publicly listed companies.
PT Astra International Tbk, PT Unilever Indonesia Tbk, PT Bank Central Asia Tbk, and many other listed companies are considered the best in their fields. But first of all, we need to understand what going public means for a company.
The term Go Public can be translated as a company’s activity to sell some of its shares to the general public through the Initial Public Offering (IPO) mechanism. Then, why do entrepreneurs decide to Go Public, what are the benefits they get when they Go Public?
There are several reasons why a company chooses to Go Public:
- To raise fresh capital.
The company could raise money from the public and use it to extend the business after selling some of its shares. The public who bought the shares will not take part in managing the company; the management can still keep the company under good control.
- To improve transparency.
A publicly listed company is required to adopt the principle of transparency because the public who owned some of the shares are entitled to know about the company’s performance.
- To improve the company’s image.
A publicly listed company is more prestigious compared to a private company.
Publicly listed companies are regulated under Law No 8/1995 on capital market and under the Capital Market and Financial Institution (Bapepam LK) regulation.
Generally, a company has to go through four stages before going public:
- Preparation stage
The company holds a general shareholders meeting (RUPS) to gain approval from all shareholders, and then decide how much shares they want to release to the public. The company changes the company’s statute from a private company to a listed company. After obtaining approval, the company appoints an underwriter and other supporting institutions such as a public accountant, legal consultant, notary public, and assessor. The parties appointed have to be registered at Bapepam LK.
- Submit documents about the intention to register
A company has to submit documents which contained the principle of transparency and a brief prospectus about the company, such as the company’s profile, the profit-loss balance, company’s performance projection, and how the company will use the IPO proceeds. The company must also include opinions from other supporting institutions on the company’s financial report, company’s legal status. The company will be held accountable for the accuracy of all the data and information it submitted.
Bapepam will evaluate the documents in 45 days and will declare them effective if they are considered complete. But if it’s considered incomplete, the company will have to complete them first.
- Initial public offering stage
The company may offer the shares to the public once Bapepam issued an effective statement. The mechanism of the IPO is arranged by the underwriter. The company has two days to determine the share allotment for investors after the offering period ended.
- The listing stage at the bourse
The shares are listed at the bourse three days at the most after the date of the allotment. The company is also required to report its public offering result to Bapepam LK three days at the most after the share allotment.