A new online information service - "Go Public" - has now been launched by the Indonesia Stock Exchange (IDX) in five cities - Jakarta, Surabaya (East Java), Bandung (West Java), Semarang (Central Java) and Medan (North Sumatra) - in an effort to inform privately-held companies about the advantages of listing on the IDX through an initial public offering (IPO). Tito Sulistio, General Director of the IDX, informed that one matter that blocks companies from undertaking an IPO is that this corporate move is believed to be complicated, costly, and time-consuming.
The new information service - Go Public Information Center - will present all necessary information to private firms about the steps and processes required to become a listed company in Indonesia (including information about underwriters). The center was first opened in Indonesia's capital city of Jakarta (in June 2016), located at the ground-floor of the Indonesia Stock Exchange Building. Over the next couple of years the IDX plans to open information centers in 15 more cities.
The IDX targets to see 35 companies conduct on IPO on the local bourse in 2016. However, this probably is a too ambitious target. So far this year only eight companies have been added to the IDX.
Only 529 companies are listed on the Indonesia Stock Exchange (while there may be more than 60 million business units active in Indonesia; mostly small and medium sized enterprises). This figure is much lower compared to listed companies in Thailand (644), Singapore (766) and Malaysia (904). Being Southeast Asia's largest economy, Indonesia is eager to top this ranking somewhere in the future. Meanwhile, in the advanced Asian nations, the number of listed companies is much higher.
According to the IDX, costs of an IPO (paid to the bourse, auditors, underwriters, independent appraisers and legal counselors) is approximately 3.16 percent of the total funds raised in the IPO. Those companies that have existed for at least a year and have a minimum of IDR 5 billion (approx. USD $373,340) in net assets can undertake an IPO on the IDX. To make it more attractive to conduct an IPO, companies are offered several tax incentives, including a discount of income tax up to 5 percent.
Advantages for a company to go public:
- Generate fresh funds that can be used for business expansion or to pay off debt
- Raise public awareness of the company/adding a new group of potential customers
- Increase the company's market share
- Lucrative exit strategy for founding individuals
- Improved management due to mandatory higher degree of financial and corporate transparency to the public
Disadvantages for a company to go public:
- Higher costs of complying with regulatory requirements
- Adjust to a higher degree of financial and corporate transparency
- "Market pressure" causes companies to focus on short-term instead of long-term growth