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Binus Business School MM Professional Business Management.

Vittorico Andreas
Corporate Finance - Paper #1
1412406710
(L1B3-9601LEC) Mr Bisma Dewabrata
November 2014

Name

Binus ID :
Date

: 7

Listing and Initial Public Offering of Securities


Companies can list their outstanding or newly issued securities. In the latter case
listing of securities on the stock exchange is preceded by an IPO. When used in the
context of capital markets, the widely known abbreviation IPO stands for Initial
Public Offering and means the first allocation of newly issued securities, usually
stocks or shares, to the public. If you hear that a company decided to go public or
float its shares, then its setting up for an IPO and plans to have its shares listed or
admitted to trading on the stock exchange.
To do an IPO, the issuer company often employs the assistance of an investment
company, which then becomes the underwriter of the issue. The underwriter will help
the company to see the process through, from the planning stage, including price
determination, to the actual sale of the securities to investors.
Why Does a Company Decide to Go Public?
Maybe above questions looks simple, but actually theres A large number of reasons
exist for a company to decide to go public. Going public and offering stock in an
initial public offering represents a milestone for most privately owned companies.
Most companies that opt to go public do so to raise money; however, a private
company with successful operations has other alternatives for raising money. For
example, the company could obtain private financing from a venture capital group
through a Regulation D offering to accredited investors. Another alternative is for the
business to be financed through a joint venture with an established company. It is
important for a business to consider its growth potential and the advantages and
disadvantages of going public before deciding how to proceed.
Advantages for a Private Company to go Public and having Listed Stock
In addition to the prestige a company gets when their stock is listed on a stock
exchange, other advantages for the company include:

Cash - The primary reason most companies go public is to raise additional


capital. Unlike debt, companies do not repay capital raised through the
issuance of an IPO. This is a major advantage for firms because it allows them
to use the additional capital to grow its operations, hiring more people, building
facilities and creating breakout products, and it also can be extremely helpful
for making important business-growing acquisitions, do the expansion, increase

market share and increase profits. In some cases, capital raised though going
public helps companies obtain more capital in the future through debt and
equity. Going public also allows a company to include stocks as a part of
employee and management incentive plans. A typical IPO will raise between
$100 million to $150 million depend on the company value itself. However, part
or even all the cash might instead go to the existing shareholders, such as the
founders, senior executives and investors.
Credibility - Being a publicly trading company is considered a major
achievement. And it also is a statement; it means a company has the
wherewithal to meet rigorous federal regulations. This is especially important
for companies that eventually want to land larger customers. Going public
provides a sense of corporate stability.
Currency - The value of private stock is difficult to determine. After all, its
usually difficult to convert it into cash. But such is not the case with public
stock. And because of this, a company can use its stock as currency to buy
other companies.
Minimize Risk - by selling the stock to the market, it means the owners
decrease their share within the company and also decrease the risk percentage
that they have with other shareholders. Go public really become a perfect
solution for the company that have some prediction and some probability that
the company will face some issue and problem in future, but still want to run
and have the company, owner can just spread the risk of ownership among a
large group of shareholders but still own the company with the biggest shares.
Power - The private company will have lack of power if you want to negotiate
with the banks, But once You are a public company the Bank will more consider
You. Public company will more solid standing when negotiating interest rates
with banks, also have additional leverage when obtaining loans from any
financial institutions.
Companies can offer securities in the acquisition of other companies
Stock and stock options programs can be offered to potential employees,
making the company attractive to top talent
In some country, become a go public company will get tax advantages

IPOs normally ensure lower cost of funds compared to borrowings from banks
the issuer builds up a history in the market: once youve done your IPO
successfully, it will be easier to generate equity funding from the stock market
in the future

Market exposure - having a companys stock listed on an exchange could


attract the attention of mutual and hedge funds, market makers and
institutional traders
Indirect advertising - the filing and registration fee for most major exchanges
includes a form of complimentary advertising. The companys stock will be
associated with the exchange their stock is traded on
Brand equity - having a listing on a stock exchange also affords the company
increased credibility with the public, having the company indirectly endorsed
through having their stock traded on the exchange.

Other Considerations for a Company Going Public

Offering shares to the public has other advantages for companies, besides the
prestige of having their stock publicly traded on a stock exchange. Before the
Internet boom, most publicly traded companies had to have proven track records and
have a history of profitability.
Unfortunately, many Internet startups began having IPOs without any semblance of
earnings and without any plans on being profitable. These startups were funded with
venture capital and would often end up spending all the money raised through the
IPO, making the original owners rich in the process and leaving the small investors
holding the bag when the shares became worthless.
This technique of offering shares without creating value for stockholders is
commonly known as an exit strategy, and was used repeatedly during the Internet
boom causing the dot.com bubble to burst and bringing down the market for IPOs in
the early 2000s.
Nevertheless, some companies choose to remain private, avoiding the increased
scrutiny and other disadvantages having publicly traded stock entails. Some very
large companies, such as Dominos Pizza and IKEA remain privately held.
Disadvantages for a Private Company to go Public and having Listed Stock
There are a number of reasons why a company may choose not to go public,
especially if it has another way to raise capital. Going public is time consuming - the
process can take up to two years. During the process, much of the manager's time is
dedicated solely to overseeing the issuance of the company's stock. Go public also
an expensive process (costs can range from $250,000 to $1 million), and if the
offering does not go through, the company will lose that money. Typical expenses
associated with a public offering include legal and accounting fees, filing fees, travel
costs, printing costs and underwriter's expense allowance. Going public can also be
an extremely difficult process, especially if the business and its management are not
familiar with the registration process. The company will need to put all its business
affairs in order and the day-to-day business operations will likely be disrupted.
Another disadvantage of going public is that public companies operate under close
scrutiny. The prospectus reveals substantial information about the company including
transactions with management, executive compensation and prior violations of
securities laws. This may be information the company would rather not reveal. In
addition,
Another disadvantage of issuing an IPO is that the company must answer to its
shareholders. When a company issues stocks, the individuals who buy the stock are
essentially owners in the company. As the number of owners increase, the
management's control of the company is diluted. Shareholders with significant
ownership in a company can vote to replace managers and directors, as well as gain
more authority during the decision-making process. The bureaucracy will be more
complicated. This may be hardest for companies that previously were run by a small
number of individuals who made decisions as they wished. Public companies must
comply with reporting requirements under the Exchange Act of 1934 as soon as the

registration statement becomes effective. Complying with these reporting


requirements can be expensive.
There is also an increased risk of exposure to civil liability for public companies,
executives and directors for false or misleading statements in the registration
statement. In addition, officers may face liability for misrepresentations in reports
filed with the SEC, for disclosing false information about the company or for insider
trading.
There is a new pressure on public companies to increase earnings. Even successful
businesses will face this pressure as shareholders become extremely focused on the
company's current earnings. Because shareholders are often only investing for the
short term, they want to see quick, steep rises in the stock's price so they can sell
their shares for a profit. Thus, there is tremendous pressure to increase current
earnings.
Public companies are also at risk of takeover attempts. It is generally advisable for
the company to implement certain anti-takeover measures such as a staggered
board of directors.
Any company that has ambitious development plans will at some time or another
consider seeking listing on a stock exchange. Stock exchanges maintain various lists
of securities, with different requirements for securities and their issuers to be
complied with. Thus, NASDAQ OMX Armenia has two lists for stocks A and B - and
two for bonds Abond and Bbond. The stock exchange must see to it that the
securities included in the lists comply with respective criteria. So, while the listed
status of a security does not guarantee that it will do well in the market, the fact that
its issuer was able to comply with the requirements and qualify for listing is regarded
as a sign of quality.
Conclusion
Any business that is considering going public must know the advantages and
disadvantages of such a decision. Those listed above are only some of the relevant
considerations. An attorney with experience in securities law can assist you with
analyzing these considerations and making a decision that suits your company.
Case study
The case study discussion will engage on the family company that recently decides
to go public in Indonesia, the company is Blue Bird Groups. Blue birds line of business
are from taxis, container to heavy equipment, Blue Bird Group is one company for all
your transportation needs. For many residents of Indonesias capital and largest city,
Blue Bird isnt just another taxi company -it has become a way of life. If New York is
famous for its yellow taxis and London for its black cabs, then Jakarta has Blue Bird to
thank to for the swarms of blue that cruise about the streets of this busy metropolis
day by day.

By serving million of passengers per month across the country, Blue Bird Groups line
of services encompasses a broad range of spectrum, from regular taxis (Blue Bird &
Pusaka) up to executive taxi (Silver Bird), limousine & car rental (Golden Bird),
charter bus (Big Bird), Logistic (Iron Bird Logistic), Industry (Restu Ibu Pusaka-Bus
Body Manufacturing & Pusaka Niaga Indonesia), Property (Holiday Resort Lombok &
Pusaka Bumi Mutiara), Supporting Services (Hermis Consulting-IT SAP, Pusaka
Integrasi Mandiri-EDC, Pusaka GPS, Pusaka Buana Utama-Petrol Station, Pusaka
Bersatu-Lubricant, Pusaka Sukucadang Indonesia-Spare Part) and Heavy Equipment
(Pusaka Andalan Perkasa & Pusaka Bumi Transportasi).
Part of our success is owed to our ability to maintain such a high standard of quality
and service over the years. Yet it is the strategic placement and easy availability of
our vehicles that ultimately earn us the reputation as a most reliable transportation
partner.
Today, Blue Bird Group services can be enjoyed in many of Indonesias largest cities
including Jakarta, Bali, Bandung, Banten, Batam, Lombok, Manado, Medan, Padang,
Pekanbaru, Palembang, Semarang, Solo, Surabaya and Yogyakarta. They are also to
be found in the heart of major business and tourist destinations throughout the
country.

Bisnis.com, JAKARTA Operator taksi PT Blue Bird Tbk. menargetkan dapat meraih
dana hingga Rp4,9 triliun dari penawaran umum saham perdana sebanyakbanyaknya 531,4 juta lembar saham baru atau 20% dari modal ditempatkan dan
disetor.
Adapun, harga penawaran ditetapkan pada kisaran Rp7.200 Rp9.300 per lembar
saham.
Sekitar 50% dari dana initial public offerings (IPO) itu akan digunakan untuk
membiayai belanja modal termasuk pembelian kendaraan dan akuisisi pool.
Selain itu, perseroan juga mengalokasikan sekitar 35,71% untuk melunasi pinjaman
dari sejumlah bank dan sekitar 14,29% akan dimanfaatkan sebagai modal kerja
perseroan dan entitas anak.
Perseroan akan menggunakan 35,71% dana hasil IPO untuk membayar utang kepada
Bank BCA senilai Rp400 miliar dan pinjaman kredit investasi dari sejumlah bank
dengan nilai total Rp817 miliar.

Sebagai informasi, total liabilitas perseroan saat ini mencapai Rp4 triliun, yang terdiri
dari Rp1,6 triliun berupa liabilitas jangka pendek dan Rp2,3 triliun merupakan
liabilitas jangka panjang.
Adapun, rasio liabilitas terhadap ekuitas perseroan pada tahun lalu mencapai 3,16
kali, atau meningkat dari posisi pada tahun sebelumnya sebesar 2,7 kali.
Per 30 April 2014, rasio tersebut turun menjadi 2,72 kali.
Dari sisi kinerja, pendapatan bersih Blue Bird pada 30 April 2014 naik 31,6% menjadi
Rp1,47 triliun dibandingkan capaian pada periode sama tahun lalu senilai Rp1,12
triliun.
Perseroan mencatat pertumbuhan pendapatan rata-rata sekitar 23,7% dalam 3 tahun
terakhir.
Purnomo Prawiro, Presiden Direktur Blue Bird, optimistis penawaran umum saham
perdana tersebut akan sukses walaupun kondisi pasar modal sedang terkoreksi,
mengingat respons investor terhadap aksi korporasi ini sangat positif.
INILAHCOM, Jakarta - PT Blue Bird Tbk melakukan penawaran umum atau
Initial Public Obligation (IPO). Langkah IPO Blue Bird agak tersendat karena
masih ada sengketa keluarga. Tetapi, setelah sengketa selesai, Otoritas
Jasa Keuangan (OJK) menyatakan praefektif.
"Ingin IPO, karena pertama, bisa memberikan saham. Akan dialokasikan ke 5.000
orang pengemudi," ujar Presiden Direktur Blue Bird Purnomo Prawiro saat IPO di
Jakarta, Jumat (3/10/2014).
Purnomo menjelaskan alasan kedua, yakni agar para pelanggan Blue Bird dapat
memiliki saham.
Sementara itu, Direktur Blue Bird Sigit Priawan Djokosutono akan melepas 20 persen
saham ke publik. "Setelah public expose baru kita bisa kasih harganya dari 531.400
juta lembar saham," jelas Sigit. [aji]

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