Indonesian Startups Targeting Public Investors with IPO

TEMPO.CO, Jakarta - IPO process by Indonesian startups is going to increase funds for the future business expansion. 

The rapid growth of technology has spawned many industries to expand their businesses in the digital ecosystem. Therefore, as the start-up companies spring up they also compete with each other to be in the forefront. One of the efforts to improve their performance is by obtaining fresh sources of funds through the Initial Public Offering (IPO) scheme.

IPO is the process of offering new shares to the public in the open market. Through this offering, it is possible for companies to obtain capital from public investors. Companies that have passed the IPO process are no longer owned by individuals, but by public investors.

Esa Soeryaningrum, the Program Director of the Institute for Development of Economics and Finance (INDEF) and a Lecturer in the Faculty of Economics and Business, Diponegoro University said that there are various purposes of a company’s decision in doing an IPO. Besides improving their financial, the funds can also be used to accelerate the expansion of the company's growth.

"In addition, an IPO not only can improve the company's credibility but also can be a marketing tool for the company. By going public, the company value will increase considerably in the future, along with its stock price," Esa told Tempo on May, 5th 2021.

One of the start-up companies that is currently preparing an IPO on the stock exchange is Tokopedia. The Indonesian technology company is planning to do a dual listing in Indonesia and the United States. More than a year ago, Tokopedia has continued to encourage the realization of positive Earning Before Interest, Taxes, Depreciation and Amortization (EBITDA) so that they can enter the Indonesia Stock Exchange (IDX) as soon as possible.

Responding to this preparation, Esa said that this was the right step. Through the IPO process, Tokopedia can increase the capital to support its future business expansion, "However, this IPO is better for the domestic investors, as Tokopedia will increasingly support the sale of local products," she said.

Esa explained that there are several stages that Tokopedia needs to prepare upon conducting an IPO. Some of these things include obtaining approval from stakeholders and preparing underwriters for conducting an IPO, submitting an application for listing of shares to the IDX and a registration statement with the Financial Services Authority (OJK), as well as a brief prospectus and public exposure when the OJK has issued a public permit.

"Furthermore, companies can go public to sell stocks in the open market, after the company registration statement is declared effective by the OJK. The IDX will give approval and announce the listing of the company's shares along with the stock code for purposes on the stock exchange. After that, investors can trade the company's stocks to other investors through securities companies that are members of the stock exchanges listed on the IDX,” explained Esa.

Esa also explained that the large capital opportunities that Tokopedia might get after going public will have consequences for Tokopedia to work with optimal quality. This will also have an impact on shareholders in increasing sales due to Tokopedia's improved credibility.

Esa revealed that the preparations made by Tokopedia for the IPO were good to be imitated by other startup companies. Not only for profit, but also in order to achieve the company's vision and mission, supporting the improvement of the national economy. "It is time for the start-ups in Indonesia to develop their business through IPOs for expansion," she said.(*)

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