Getting into the Initial Public Offering (IPO) game
Money is to businesses what oxygen is to humans; but unlike oxygen, money doesn’t form out of thin air, requiring a bit more effort on the part of businesses who want to grow or to survive.
So, what can businesses do to obtain an infusion of cash? If your mind immediately err towards obtaining a bank loan, iMoney’s Group CEO and Co-Founder, Lee Ching Wei, advises against high interest-bearing form of financing in the early stages of a business.
The good news is, there are many other avenues to obtain financing and one of it is initiating an Initial Public Offering (IPO) exercise.
Definition and purpose
An IPO is the first sale of stock by a private company to the public. This act of selling stock is by way of listing on a stock exchange, which in Malaysia, is solely regulated and operated by Bursa Malaysia Berhad.
More often than not, companies list their shares on the stock exchange to meet its goal of raising additional capital, however, other reasons of doing so may include:
- to encourage and reward loyal and committed employees via an employee equity scheme; and/or
- to enhance the company’s profile and credibility in the eyes of its customers and suppliers.
What’s the buzz?
How does IPO affects us who are not business owners? If you are an avid investor, you will most likely be looking out for new or hot IPOs as they offer you the novel chance of being the first public shareholders in a company with exciting growth opportunities.
For those who were fortunate enough to jump on the IPO bandwagon of these household brands, Wal-Mart, Home Depot, Walt Disney, Dell, Microsoft, Coca-Cola, Target, or Starbucks, they may have had some volatile price fluctuations along the way, but there is no question that they have made a substantial amount of money.
According to the a report by Free Malaysia Today, due to the various cooling measures introduced by the government to curb property speculation, many veteran investors are turning to IPOs, which have been performing exceptionally well since the 13th general election in May 2013.
“Many investors, who were previously interested in property buying, are now having a re-look at the stock market, as a result of the government’s decision to double the Real Property Gains Tax (RPGT) from 15% to 30% for properties disposed within three years of purchase,” said Pong Teng Siew, head of research at Inter-Pacific Securities Sdn Bhd in the same report.
Bright IPO days ahead in Malaysia
Investors who are looking for a high return investment vehicle, subscribing for shares through an IPO is looking to be a worthwhile consideration.
According to information from bankers compiled by Reuters, Malaysia’s initial public offering market could more than double this year to $7.1 billion (RM23.4 billion), led by the $3 billion (RM9.8 billion) sale of state investor 1Malaysia Development Bhd´s energy assets.
Want to list your company on Bursa Malaysia but not sure how? We explain what IPO is and the steps involved in listing your company on Bursa Malaysia here.
