Companies have many alternatives of financing source, internal or external. Alternative internal financing generally comes from the retained earning, while external financing can come from creditors in form of debt, other forms of funding or by issuing debenture papers, and even financing by participating in stock (equity). Financing by participation mechanism is usually done by selling company’s stocks to the public or often known as going public.
To go public, companies have to make internal and documents preparation in accordance to the requirements needed for going public, and fulfill all the requirements stated by the Bapepam. Public offering or go public is the activity of stock or other marketable securities offering by an issuer (going public firm) to the public based on the procedures arranged in the Capital Market Law and its Implementation Rules.
Public offering accommodates these activities:
- Primary Market Period, when stocks are offered to investors by underwriter through selected Selling Agent;
- Shares subscriptions, the allocation of investors’ securities order according to the available amount of securities.
- Stock allotment at the Exchange, when stocks are traded in the Exchange.
Stocks public offering procedures can be categorized into these 4 steps:
- Preparation Step
In this step, the company has to prepare everything needed the public offering process. First, the company, who will issue the stocks, holds Shareholder General Meeting and asks the approval from shareholders. After the approval, the issuer will appoint the underwriter, market institutions and supporting professions that consists of:
- Underwriter. Underwriter is the party who has the most involvement in assisting the issuer to go public. Underwriter’ has to prepare all the documents, prospectus, and giving the guarantee of the issuing process.
- Public accountant (Independent Auditor). Public accountant is responsible to audit or check the income statement of the issuer.
- Appraisal Company for appraising the fixed assets owned by company and accounting proper value of the fixed assets.
- Law consultant for giving legal opinion.
- Notary for making amendments of the company’s basic budget and various agreement underlying the public offering, and notes of meeting.
- Registration-Statement Submitting Step
In this step, the company will complete the registration by giving supporting documentations to the Bapepam until the Bapepam states that the Registration Statement is effective.
- Shares Offering
In this step, the issuer offers its stock to the investors’ society. Investors can buy the shares through their appointed selling agents. Offering period is usually about three trading days. Worth to notice, that not all of the investors’ desires are fulfilled in this level. For instance, 100 million shares are released in the market, while the amount of shares that the investors want to buy is 150 million shares. If the investors could not get the shares at the primary market, they can buy it in secondary market after the stock is listed in exchange.
- Shares Listing in the Exchange
After selling the shares in primary market, the stocks are listed in the Exchange. In Indonesia, the stocks could be listed in the Indonesia Stock Exchange (IDX), Surabaya Stock Exchange, or even in both exchanges.
