Top five IPO readiness tips.
    Category: Smart Investing 2016 By : Jennie M. Xue Read : 415 Date : Monday, June 20, 2016 - 03:17:59

    Indonesia’s economy has faced ups and downs, from its economic resilience when it grew by 4.6% in 2009, and 6.2% in 2010, credit ratings upgrade to investment grade in 2012, to headwinds in 2013 as the U.S. government scaled back its quantative easing. The bleak picture persisted in 2014 as presidential elections took place and investors waited on the sidelines. Last year was also not immune to investors’ jitters with only 18 companies listed on the exchange.

    With all the difficulties, one cannot ignore the steady upward curve. Aggregate market capitalization of Indonesian listed companies has grown exponentially from $22 billion in the 1998 post Asian financial crisis to $420 billion in 2014. Indonesia’s ratio of market capitalization to GDP, a valuation measure that investors give to listed companies vis-à-vis the total output of the country, stood at 48% in 2014. This is still relatively low compared to Malaysia (140%), Thailand (115%), Philippines (92%) and Singapore (244%). This valuation underpins huge growth potential for Indonesia’s stock market. However, a boost to market liquidity is needed. IDX hopes to see 35 new listings in 2016. A number of Indonesian companies remain hopeful that the derailed IPO train will get back on track.

    The most common reasons for an IPO are: to provide an exit for current shareholders, to finance innovation and growth and to increase visibility and credibility with stakeholders. The most common question is when is the right time to launch an IPO. An IPO window can open and close with the blink of an eye. External market forces are beyond a company’s control but preparation is not. The more prepared an organization is, the better the chances are for a successful IPO.

    A successful IPO is one in which the sellers receive maximum value for their investment while giving due consideration to the need of a price-bump to benefit investors on day one (“first-day pop”). Furthermore, the newly listed company has to deliver its promises made during the investor roadshows. A failed IPO is characterized by the exact opposite: a disappointing price and poor performance. So the real question is: What makes a successful IPO? Successful IPOs do one thing – PREPARE. Below are the top five tips for a successful IPO:

    1) Start with strong IPO leadership. Ensure that your IPO team has a strong leader in place. In most companies, this role is assigned to the chief financial officer (“CFO”), sometimes head of business development or corporate finance. For larger or more complex IPOs, an IPO steering committee is usually formed. A strong IPO leader should be clearly identified as he becomes the point of contact, both internally and externally, and will drive the whole process, achieve milestones, liaise with stakeholders, and take critical decisions.