Course : FINC6001

Effective Period : September2019

IPO, Share Issuance, Stock Split, Dilution

Session 16
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 Acknowledgement

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use this slide to give information about the source
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These slides have been adapted from:

Leach, J Chris. (2018). Entrepreneurial FInance,

Cengage. USA. ISBN: 978-9-814-83456-8

Chapter
16. IPO, Share issuance,
Stock Split
www.idx.co.id
https://gopublic.idx.co.id/2016/06/22/
manfaat-go-public/
Dear Lecturers and Students:
• You can discuss the importance the company doing
IPO,
• and the steps of IPO from web idx.co.id
• Related party associated with IPO
 There are many advantages for a company to go
public. Some of the advantages are as follows:

There are many benefits for companies to conduct public

offerings (IPOs) or commonly called go public.
1. Providing Companies Access to Long-Term Funding
2. Increasing the Company’s Value
3. Improves the Image of the Company
4. Encouraging Employee Loyalty
5. The Ability to Maintain Business Sustainability
6. Tax Incentives
 Providing Companies Access to Long-Term
Funding

• This is the primary consideration for companies that want to go

public and become a public company. Capital obtained from the
capital market can be used to increase working capital in order to
support the growth of the company, to pay out debts and to make
investments or acquisitions.
• Going public will also increase the equity value of a company so
that the company may have the optimal capital structure.
• After becoming a public company, a company can take advantage
of the capital market to obtain further funding, through limited
public offering, which is restricted to current investors, or through
secondary offering and private placement. After going public,
attracting strategic investors to invest in the company will also be
easier.
• By becoming a public company listed at the Indonesia Stock
Exchange, banks or other financial institutions will have more trust
in the company. 
 Increasing the Company’s Value

• By becoming a public company listed at the Indonesia Stock

Exchange, the public can easily obtain information on the
movement of the company’s value at any time. Any
improvements in the company’s operational and financial
performance will generally have a positive impact on the
company’s share price, which will ultimately increase the
value of the company as a whole.
• If the company founder/owner needs funding for
other purposes, divestitures can also be done through the
Indonesia Stock Exchange with optimal value. An active
trading of shares in Indonesia Stock Exchange can create a
price that can be used as a reference by shareholders for
their transaction.
  Improves the Image of the
Company
• By becoming a public company listed at the
Indonesia Stock Exchange, information and
news relating to the company will be
frequently covered by the media, data
providers and securities analysts. These
publications are provided free of charge and
will help enhance the company’s image and
exposure of the products produced by the
company, creating new opportunities and a
broader customer base for the business.
 Encouraging Employee Loyalty

• If a company’s shares are traded in the Stock

Exchange, employees will gladly receive incentives in
the form of shares. By getting the employees
involved in the company growth process, it will help
create a sense of ownership among the employees,
which in the end can improve employee
professionalism and work performance.
• In addition, an employee stock allocation program
or stock option is also a strategy a company can use
to retain key employees, without spending the
company’s cash. Employees can benefit from selling
their stock incentives obtained from their company
through the Indonesia Stock Exchange.
 The Ability to Maintain Business Sustainability

• One of the common issues that trigger’s the downfall of a family

owned business is a dispute between family members. By
becoming a public company, family members can own shares of
the company in their respective portions and can sell or buy
more shares through the Indonesia Stock Exchange. The
founding shareholders can also entrust their shareholdings
to the company’s management who are more professionally
competent and can easily oversee the company through a
financial report or information disclosure mandated by
authorities.
• In the event a company is suffering financial difficulties, failure to
repay debts to creditors and requires debt restructuring, the
debt to equity swap strategy can be an alternate way out for
both parties. Creditors, who received shares from debt
conversions, can sell the shares through trading mechanisms at
the Indonesia Stock Exchange. Such strategy will not be easy to
do if the debtor is a private company.
 Tax Incentives
• To encourage companies to go public, the
government provides tax incentives through
Government Regulation No. 56 Year 2015
Concerning Amendment on Government
Regulation No. 77 Year 2013 Concerning
Reduction on Income Tax Rate for Domestic
Public Corporation Taxpayer. The Domestic
Public Corporation Taxpayer can obtain a
decrease in income tax rate (PPh) of 5% lower
than the price of the mandatory domestic
entity income tax, as long as 40% of the
company shares are publicly listed and traded
on the Exchange and have at least 300
shareholders.
company can list their shares in The
Requirement
Main Board or Development Board.
Requirements to be able to list in the
Indonesia Stock Exchange in The Main
Board and Development Board are:
 Preparation for going public
I. Forming an Internal IPO Team
The team must consist of individuals with financial and legal
expertise. This team will collaborate with external professionals
who are appointed to assist in the process of IPO, particularly in
preparing the prospectus and other related documents. 
II. Early Consideration
Range of fund needed, % Public Ownership, %Dilution, any provision in the
regulation, new board composition
III. The Appointment of External Professionals

IV. AGM and Changes in the Articles of Association

V. Preparing Documents
 Preparation for going public

III. The Appointment of External Professionals

The Underwriter which will assist inoffering the company’s shares to
investors;
A public accountant that will perform an audit of the company’s
financial statements;
Legal consultants which will conduct the examination of legal aspects
and provide legal consultations;
A Notary who will assist in changing the Articles of Association, making
certificates and agreements;
Appraiser, if the company owns fixed assets like lands or buildings that
need to be assessed by an independent assessor;
Administrative Bureau which will assist in performing administration of
the company’s share ownership.
IV. AGM and Changes in the Articles of Association
V. Preparing Documents
 Preparation for going public

IV. AGM and Changes in the Articles of Association

V. Preparing Documents
• The Company Profile, information regarding IPO plans,
Underwriter and information on the external capital market
supporting professionals.
• Legal opinion reports from a legal consultant.
• The audited financial statements from the public accountant.
• The Appraisal Report (if available).
• The Company’s Articles of the Association of Public Company
which has been approved by the Minister of Justice and Human
Rights.
• Prospectus, which contains the information contained in
document a. up to e. above.
• Financial projections
 Go Public Process

www.idx.co.id
Thank you,