IPO/Listing is often the commonest key to unlock and maximised shareholder value.
Append below are some of the following obvious advantages of taking a private company into a public listed status:
- Enhances profile and standing of the company;
- Access to capital market;
- Flexibility in sourcing funds;
- Ability to get cheaper funding due to public listed status;
- Greater visibility;
- Added value to share by increasing its marketability;
- Compliance with NDP
Interestingly, we also observed a similar growing trend of public listed companies contemplating to bring their companies or subsidiaries back to private status. [refer to article on company going private]
As mentioned, despite IPO/listing as the commonest key, Management needs also be clear before seeking listing and should at least consider the following factors when intending to go for IPO:
- Is the company able to withstand constant public scrutiny from the public;
- The responsibility towards public accountability as the investing parties are outsiders;
- Family controlled companies seriously might need to consider the dilution of their shareholding or control;
- The constant need to comply with strict legislation for example the announcement of sensitive matters, insider trading, complying with the time line on financial reporting;
- Review the cost of listing and “costs” of keeping good corporate governance.
Not forgetting that there have real life situation where after attaining public listed status, management find themselves no longer fanciful of the public listed status simply for the following reasons:
- When their companies were listed, it was in a robust share market environment but subsequently after that, when gloomy market situation prevails, their company‘s share prices have been grossly under-valued by the public/share market;
- The management is unable to take the onerous corporate governance and disclosure requirements;
- The initial objective of listing no longer provide any tangible benefits;
- To avoid assets strippers/predators who seeks the opportunities in public listed companies where their share prices are below their net tangible assets (particularly in property development and stock broking businesses);
- High cost of maintaining those onerous corporate governance and disclosure requirements
In Malaysia, there are some interesting like Astro, UDA Holdings who seeked public listing and immediately few years later go back to private. Of course, every listing and reverse gear of privatization can have many justifications but ultimately enhancing/maximising shareholder value should be the key consideration!
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