TheJakartaPost
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Stock exchange and entrepreneurship
A capital market is not only an intermediation between investors and companies that need capital, either debt or equity, but also creates an opportunity for entrepreneurs to professionally start and manage their business ideas by establishing new companies. Of course, the question arises as to how the capital market can be an attraction for entrepreneurs. #opinion
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A trading floor of Indonesia Stock Exchange (IDX) building. (JP/Wienda Parwitasari)
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capital market is not only an intermediation between investors and companies that need capital, either debt or equity, but also creates an opportunity for entrepreneurs to professionally start and manage their business ideas by establishing new companies. Of course, the question arises as to how the capital market can be an attraction for entrepreneurs.
Based on data on initial public offerings (IPOs) on the Indonesia Stock Exchange (IDX) from 2010 to 2018, around 80 companies were still under 10 years old. Most of them are listed on the development board.
Most of those young companies operate in trade, manufacturing, followed by infrastructure, utilities & transportation; property, real estate & building. Some other industries, such as mining, agriculture and finance, also contribute to creating young companies that meet the requirements for an IPO.
According to the IPO data, the average IPO companies experienced underpricing where the first-day closing price was higher than the offering price. Underpricing is positively welcomed from the investing public because they are willing to pay more than the IPO price.
Interestingly, the percentage of underpricing in the development board is relatively larger, on average, than that in the main board. This means that small companies are more likely to be welcomed by public investors.
The current IPO requirements have accommodated start-up companies to be listed on the IDX. The regulation gives the opportunity for young companies to sell their equity shares to the public. Those that have been established for more than a year can propose to sell their shares to the public by being listed on the IDX development board.
In addition, companies can have negative earnings for listing on the development board. This provides opportunities for companies in the introduction and growth phase to raise new capital from the equity market. However, they have a further requirement to have positive earnings in their earning forecasting in the second year after listing.
