Initial Public Offering (IPO) is a process executed by the management of the company to list their shares on the stock exchange. The company’s shares can be traded to the public through IPO execution. The entry of new shareholders into the company automatically increases the company’s capital that can be utilized for various purposes. Those purposes can be in the form of the company’s working capital, capital expenditures, and other strategic plans that have been planned by the management of the company. This makes an IPO being similar or just like an alternative source of obtaining funds as part of its main benefits.
But in fact, the benefits of going through an IPO are more than just an alternative funding. Another benefit is to enhance loyalty. The said loyalty is referring to loyalties from both internal and external parties.
For internal parties, companies can enhance loyalties from employees and the management team through an IPO. In carrying out the IPO process, companies can offer the Employee Stock Option Plan (ESOP) and Management Stock Option Plan (MSOP) programs, which will have an effect on the company’s ownership structure.
In accordance with the Decree of the Directors of PT Bursa Efek Indonesia Number Kep-305 / BEJ / 07-2004, ESOP and MSOP are share ownership programs by employees, directors and commissioners carried out through Stock Offerings or Stock Option Offerings in order to compensate employees, directors and commissioners. This program will foster a sense of belonging for employees and management team to increase a sense of responsibility in providing the best work performance for the company.
The real benefits of the ESOP and MSOP programs have been recognized by public companies in Indonesia, both with large and small market capitalizations. Major banks in Indonesia, both State-Owned Enterprises (Badan Usaha Milik Negara, BUMN) and the private sector, have planned a share-based compensation programs for employees and management team. For example, PT Bank Central Asia Tbk (BBCA) offered this program in 2012, while PT Bank Negara Indonesia Tbk (BBNI) offered this program in 2022.
Aside from major banks in Indonesia, companies that are going for IPO this year have also started to follow the footsteps of public companies to plan the program. In July 2022 alone, there were at least 3 companies undergoing IPO process that included share-based compensation program to employees in the shares offered, namely; PT Pelayaran Nasional Ekalya Purnamasari Tbk (ELPI), PT Mora Telematika Indonesia (MORA), and PT Tera Data Indonusa Tbk (AXIO).
On the other hand, the enhancement of loyalty on the external side is aimed at customers or other stakeholders through an IPO. Start-up companies in Indonesia also recognize the benefits of IPOs in enhancing loyalty from the public. Like for example the IPO process of PT Bukalapak.com Tbk (BUKA). BUKA’s management believes that the IPO will enhance the loyalty and participation of retail investors to improve BUKA’s business development, accompanied by direct supervision and validation in achieving its profits.
Aside from BUKA, PT GoTo Gojek Tokopedia Tbk (GOTO) becomes another start-up that executes IPO is also implementing Saham Gotong Royong during the IPO. GOTO became the first start-up to implement the Saham Gotong Royong program in the IPO execution, in which the company distributes shares free of charge to qualified driver-partners. Digital economy observers said that the Saham Gotong Royong program would be a positive signal for retail investors and increase the added value of GOTO’s IPO.
The IPO’s role is seen as an important in providing sustainable benefits to the company’s business. Professional management is encouraged to plan and execute the initial listing of the company’s shares in the capital market. To achieve a successful IPO, companies need to prepare an IPO plan carefully, starting from the assessment of business prospects to offering the shares to the public so that investors are interested.
In preparing for an IPO plan, the company can be assisted by a financial advisor who has the capacity to assist in executing an IPO. SW Solution is a business unit of SW Indonesia that provides consultation and mapping services related to IPO plans. Financial advisory services for the IPO from SW Indonesia are supported by experienced practitioners and consultants together with an extensive network that spreads nationally and internationally.