Go Public Companies Definition, Benefits, & Conditions

Does your business need more funding? Let’s turn into a go public company!

Every company needs funding to ensure its business activities continue to run. Therefore, it is important for the company to maintain its cash flow so that it remains in a healthy condition, balanced between liabilities and assets. If the company’s internal funding is still insufficient to finance business goals, then you can change the form of business into a go public company.

You want to know more about what it means to go public? What are the requirements to become a go public company in Indonesia? Check out the full discussion from Activelyshare.com below.

What is Go Public?

Go public is a term in the investment world used to describe the activity of offering business ownership to the public. In Indonesia, go public companies are companies that have successfully offered shares to the public through the approval of the Indonesia Stock Exchange (IDX).

Most of the publicly listed companies in Indonesia come from the banking, daily necessities, and mining industries. However, in early 2020 until now, many companies have gone public in Indonesia from the technology sector.

Being a go public company is a privilege that many other companies cannot get. Once approved to go public, your business will receive unlimited funds, because the stock price on the exchange is determined by the strength of investor demand and supply .

For example, the stock price of your company when it first went public was IDR 1,500/share, with a total of 1 million shares. Because there are many investors interested in buying, the share price can rise to Rp3,500/share. You, who previously only targeted Rp. 1.5 billion in funds when going public, finally managed to raise capital of Rp. 3.5 billion.

Reasons for Companies to Go Public

There are various reasons why companies go public, from expanding their business to protecting themselves from bankruptcy. Details about the reasons for the company to go public are as follows.

  1. Seeking Funds to Pay Off Liabilities
    The first reason companies go public is to pay off their outstanding obligations. In order not to be penalized or even go bankrupt, the company can sell some of its shares and use the proceeds from the sale to pay off unpaid debts.
  2. Conducting Market Expansion
    The next reason companies go public is to expand market share coverage or differentiate market share. In order for the market expansion process to run smoothly without being constrained from a financial perspective, going public is one of the easiest solutions that most companies take.
  3. Improving Branding and Reputation
    When the company is still private, the founder or business owner will find it difficult to measure the strength of his branding and reputation, especially in the eyes of investors. The conditions are different if the company then conducts a public offering on the stock exchange. Business owners can see how the capital market players react to the announcement of their company’s going public, including the sentiments that occur among business observers and competitors.
  4. Changes in Shareholder Structure
    The reason the company went public last was because of a change in the structure of the shareholder in the internal business, or there was a problem that made the shareholder unable to cooperate with the company anymore. When this condition occurs, going public is the most reasonable solution that management can take. Thus, the company will avoid a crisis due to sudden capital withdrawals.

Advantages of Go Public for Companies

After discussing what going public is and why companies do it, this time we will discuss some of the advantages of going public, including:

  1. Receiving Additional Funding to Achieve Business Goals
    The first advantage of going public is that companies can get additional funding to achieve bigger business goals. Especially if the company can maintain its good performance and reputation in the eyes of the public. The stock price will also increase due to the large demand that occurs.
  2. Increasing Company Asset Valuation Company
    assets are divided into 2 major groups, namely fixed assets and current assets. The greater the valuation of the two types of assets, the productivity and profitability of the company has the potential to increase as well. Becoming a go public company is one solution to increase the valuation of the two types of assets, especially current assets.
  3. Opening Opportunities to Get Foreign Investment (PMA)
    The next advantage of going public is opening up business opportunities to receive Foreign Investment (PMA). In fact, investment funds from PMA have a higher potential than domestic investment. Thus, companies receiving PMA can expand their market more broadly and have larger funding reserves.
  4. Preventing Companies from Bankruptcy
    The last advantage of going public is to prevent companies from going bankrupt because of their unhealthy capital structure. By offering shares, companies can get additional reserve funds to prevent financial problems, such as bad debts, bankruptcy, and so on.

Requirements to be a Go Public Company according to the IDX

According to the Go Public Guidelines from the IDX, there are several requirements to become a go public company that must be met, including the following:

  1. In terms of company operations, the first requirement to become a go public company is that the company must be in the form of a limited liability company (PT). In addition, companies are also required to have independent commissioners, directors, audit committees, internal audit units, and company secretaries. As for the length of operation, the age of the go public company is at least 3 years with the same core business .
  2. In terms of Share Percentage, the requirement to become a go public company in terms of shares is that the business must have free shares (not owned by other holders) of at least Rp. 300 million, which is 10% – 20% of the accumulated shares with holders and free shares . In addition, the company must also be willing to sell shares to 1000 or more people, without choosing who the shareholders are.

Application Process to Become a Go Public Company

After knowing what going public is, the benefits of going public, and the conditions, this time ActivelyShare.Com will discuss the process of submitting a go public from beginning to end, namely:

  1. Holding a GMS
    After the requirements to become a go public company are met, the board of directors is required to hold a General Meeting of Shareholders (GMS) to announce the decision of the company to be listed on the stock exchange. This GMS is important in order to seek permission from predecessor investors to go public, especially investors with the largest percentage of shares.
  2. Choosing an Underwriter r
    The next step to go public is to choose an underwriter , an agent trusted by the company to assist with the administrative arrangement and submission of registration to the IDX. In addition, the underwriter is also tasked with analyzing the best initial share price according to the company’s valuation before entering the stock exchange.
  3. Registering with the IDX
    After the registration documents for going public are complete, the company together with the underwriters need to apply for registration with the IDX. During the document processing process, OJK will also interview the company regarding the validity of the requirements for going public. If the IDX and OJK approve the registration, the company will receive the Share Listing Approval and Prospectus Publication Permit from the two institutions.
  4. Release of Share Offerings
    After getting approval to go public, companies can carry out as many publicity activities as possible so that investors immediately buy shares. This publication can be through news, social media, TV, and other means of communication.

That’s the explanation from ActivelyShare.Com about what it means to go public, the benefits, and the requirements to become a go public company! If you want to strengthen your business and achieve greater profits, turning it into a public company is the way to go! Are you ready to apply for registration to go public today?

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