Why go Initial Public Offering (IPO)? Dr Patrick Liew, Managing Partner of GreenPro Capital Pte Ltd discussed salient points on why Small Medium Enterprises should consider Initial Public Offering (IPO) as a way of growth and exit strategy.
- What are the advantages of Initial Public Offering (IPO)?
Being a public-listed company will help to strengthen a company’s branding in the industry.The general public will perceive that the company is credible, stable, and has a good standing in the industry. These benefits will help to enhance commitment, confidence and loyalty of customers and suppliers.It can also help to develop more and better strategic alliances and business developments.
There is a positive degree of prestige in associating with a public-listed company for the founders, co-founders, and staff.The improvement of reputation and image can help to recruit and retain talents to help the company as a part of the company or part of the external value chain.The company can use equity capital such as stock options to attract talents to join its team. Equity-based incentive schemes can help employees to take on a more active ownership, participation in, and support of the company’s profits, advantage and growth,
Access To Capital
As a public-listed company, the company will be better known and generally better regarded than a private company. This can lead to growth in the business and increase in market capitalization.If retained earnings and debt funding are inadequate to support growth, the company
can create and issue a type of currency in the form of its stock and use it to raise needed capital for the business. There are generally more possibilities to raise capital in an easier, better and faster way.Besides funds raised during the initial public offering (IPO), the company can tap on various methods to raise money from the public and other sources of capital. The capital raised can be used to pay off existing debts, fund capacity development, and fund further and deeper growth.
Prior to listing the company, it has to undergo rigorous corporate, legal and financial due diligences. Top management has to take a more comprehensive and thorough review, analysis, and improvement of the company.
It is not abnormal that the company will have to put in place better structures, systems and processes to strengthen its business model, crisis and risk management systems, internal and external reporting and controls, and ongoing improvements.
After listing publicly, the company is compelled to become more effective and efficient as it has to comply with high quality and standards of corporate governance.
When top management runs the company responsibly, effectively and with proper accountability, it helps to improve the business model, its operation and results.
Mergers and Acquisitions
The company will be in a better position to facilitate mergers and acquisitions to further its growth. The company can use stocks or cash or a combination of both currencies to acquire companies to expand its business.
Going public is a positive way to increase the value of the company and improving shareholders’ returns on investment.
As there is a public and better-regulated market for the trading of the stocks, it creates better liquidity for sales of the stocks at a minimal transactional cost.
2. What are some criteria for Initial Public Offering (IPO)?
Different securities exchange has a different set of criteria.
If you’re listing on Singapore Exchange, you can find out more information on its website.
For small and medium enterprises, they may wish to consider listing on a “Third Board.”
In recent times, many exchanges have rolled out another market, such as OTC QB/QX to cater to SMEs that requires a platform to list their company publicly for a lower cost, at a faster speed, and with less inconvenience.
3. How can Initial Public Offering (IPO) help the company to expand?
As a public-listed company, it can have a stronger branding, improved model and operation, better position to attract and retain better talents, more platforms to raise more capital, and wire coverage and more connections to the market.
As a result, it can attract more and better customers and other stakeholders, improve market share, expand the range of products and other offerings, merge and acquire other companies, and be in a better position to expand regionally and globally.
4. When is a good time for Initial Public Offering (IPO)?
As a general rule of thumb, entrepreneurs should run their companies from day one as if it is a public-listed company. If they play the business game properly, they may find that they can generate more profits from leveraging on the capital market than from just owning, working in, and running the business.
The Timing for an IPO depends generally on readiness of the company, availability of adequate quantity and quality of investors, and market conditions.
5. Who are the stakeholders in Initial Public Offering (IPO) process?
To list successfully, entrepreneurs need the support of their key employees and a team of professional corporate advisors, lawyers, accountants, bankers, investment relations personnel, stock brokers, and business advisors and coaches.
6. Where else can we find more information on Initial Public Offering (IPO)?
You can google for information from credible sources. To have more targeted and relevant information, you can attend
- Conference Title: Growth Catalyst Asia 2016 – Scaling-Up & Exit Strategies for SMEs
- Target Audience: SME Owners & Key Management Teams
- Date: 1-2 November 2016
- Venue: TBA
- Website: http://growthcatalyst-asia.com/