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IPO

An IPO or Initial Public Offering is the holy grail or the ultimate jackpot for the founders as well as investors of startups. It is the day, when it dawns, that tells the founders they stand vindicated by the markets and it is also the payday for those who invested in the founders and of course the startups. But how a startup should file for an IPO? How to traverse the circuitous route from Point A to Point B? We have the answer straight from the bourses.

But before moving into it, let us explore in a generic manner, what an IPO is, technically:

The US Securities and Exchange Commission (SEC) defines IPO as the instance when a company first sells its shares to the Public. Up until that point, a company is deemed private. When a privately held company crosses a certain threshold, when it is sure that it can meet the rigours of a public listing including regulatory compliance and responsibilities, it initiates the IPO process. Typically, this stage arrives when a company achieves a Unicorn status; its private valuation reaches $1 billion.

However, companies of varying valuations but characterised by strong fundamentals, proven track record and profit potential can also file for an IPO depending on the competition it has and its capability to navigate the realm of complex listing requirements.

An IPO is a giant step for any private company as it opens floodgates of funds and gives it greater ability to grow and expand. The transparency and associated credibility enhance the long term viability and sustenance of the company as it can scale up creating a new paradigm.

The IPO shares of a company are put a price on by virtue of a systematic process called due diligence. This means, when a company, previously private, goes public, the private share ownership becomes public ownership and the extant private shareholders’ shares carry the worth of public trading price.

How a startup or SME can file for an IPO: Listing Guidelines


1. Malaysia: Bursa Malaysia guidelines

In order to encourage public listing of SMEs (Small and Medium Enterprises), Bursa Malaysia, the Malaysian stock exchange has put in place LEAP Markets, a market place where these SMEs can get listed. The advantage is that the SMEs will not get crowded out or get pushed or shoved in the heavily populated main bourse as the LEAP Markets is an exclusive arena for them.

“We have clear, comprehensive and accessible rules which govern, among others, the listing of issuers and products on our markets, and the obligations of the issuers post-listing, the trading, clearing and settlement of our products, the admission and post admission obligations of our participants,” the bourse says.

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2. India: BSE Startup guidelines

The BSE or the Bombay Stock Exchange, the oldest stock exchange in India, has the BSE Startups Platform as per the rules and regulations laid down by Securities and Exchange Board of India, the capital market regulator in the country.

The BSE Startup Platform offers an investor-friendly environment that renders a hassle-free ambience for the startups in the unorganised sector scattered throughout India to regulate themselves and become better organised by getting listed.

“The listed Startups will step into the threshold of BSE Startups Platform and foray in to the world of finance for further growth and development. BSE Startups will assist these SMEs to raise equity capital for their growth and expansion and thus help them blossom into full-fledged companies. In due time enable them to migrate into the Main Board of BSE as per the existing rules and regulations.”

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3. Indonesia: The Indonesia Stock Exchange Incubator

By providing tailor-made training, mentoring and IPO guidance, the Indonesia Stock Exchange is handholding IPOs in the tech arena. IPO is a complex process and the unicorns-in-making should not be deterred from entering the markets just because they are unable to tackle legal formalities and requirements.

“The Indonesia Stock Exchange took the initiative to become a facilitator to help digital-based startups that want to IPO by giving access to underwriter, supporting professionals and providing IPO preparation training.”

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4. Saudi Arabia: Saudi Stock Exchange: Nomu Parallel Market

An alternative equity market with lighter requirements for listing, the Nomu Parallel Market provides an opportunity to SMEs to be on a growth trajectory by providing them with multiple funding avenues post the listing. The companies listed on Nomu must have a minimum capitalisation of $2.6 million, with the number of shareholders ranging between 35 and 50. They are mandated to list at least one-fifth of their shares.

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5. Singapore: Singapore Exchange: Catalist Guidelines

Singapore Exchange, a strategically located exchange in one of the most vibrant economies in the world, has total assets of more than SGD$2.4 trillion under management as of October 2020.

For fast growing companies in Singapore, the SGX provides a listing opportunity under Catalist. This is different from the Main Board listing which is populated by established enterprises:

“Catalist caters to the needs of fast-growing enterprises. Companies seeking a primary listing on the Catalist must be brought to list by authorised Sponsors via an initial public offering (IPO) and reverse take-over.”

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6. Turkey: Borsa Istanbul: BIST SubMarket Guidelines

Borsa Istanbul has a dedicated platform called BIST SubMarket which has companies listed, the market value of which is below TRY 20,000,000 according to the free float rate. Various criteria such as activity period, net profit, minimum free float market value, public offering ratio and the Listing Directive dictate the terms of listing.

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Apart from this, Borsa Istanbul also offers a platform for non-publicly-held corporations “which issue shares to qualified investors in our Exchange or outside the Exchange without offering to public and existing partners of these corporations.”

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7. UAE: NASDAQ Dubai: Listing Guidelines

The global reach of NASDAQ needs no introduction. You may be a business in the UAE, GCC, South Asia, Europe or US; NASDAQ Dubai is uniquely positioned to serve participants and traders. It is being touted as an ideal venue for listing even for small enterprises and family businesses. The IPO process is marked by a two-stage procedure at NASDAQ Dubai.

“As well as obtaining admission of its securities to the DFSA’s Official List, the company must also ensure that its securities are accepted for Admission to Trading by Nasdaq Dubai under the exchange’s Admission and Disclosure Standards (ADS).”

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8. Egypt: Egyptian Exchange: NILEX Mid and Small Cap market Guidelines

Medium and small cap companies can raise capital at NILEX, within the regulatory environment which has relaxed listing and disclosure requirements as well as lower fees. Compared to the main market, Nilex has flexible requirements with regard to minimum capital, shareholders’ number and shares to be offered to the public. The companies are supposed to submit their audited annual financials but quarterly and semi-annual financials just need management approval before submission.

“A nominated advisor also helps the listed company to abide by the listing and disclosure rules and assists the company in preparing its financial statements and submitting them in due time.”

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9. Bahrain: Bahrain Bourse: Listing Guidelines<

Bahrain Bourse, a licensed institution subject to the supervision of the Central Bank of Bahrain, operating within a designated legal framework has the following set of guidelines to offer with regard to listing:

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