What Is An IPO? These Are The Objectives And Procedures Of Conducting A Public Offering Of Shares On IDX

IPO illustration (Pixabay)

YOGYAKARTA – The term Initial Public Offering aka IPO may be familiar to those who like to invest in shares in the stock market. So, what is an IPO?

Please note, the IPO process occurs when there is a closed company, offering shares for the first time to the public in the capital market. Companies that conduct IPOs have the opportunity to pocket fresh funds for company development.

What is an IPO?

As quoted by VOI from the official website of the Indonesia Stock Exchange, Wednesday, October 2, 2022, an IPO is a condition in which a company will sell some of its shares to the public or the general public.

Through an IPO, the general public or investors can bid, buy, or sell shares of a company.

Thus, it can be concluded that the IPO makes the company no longer owned by individuals or individuals. Instead, it can be owned by the public.

IPO Purpose

There is a reason for a private company to conduct an IPO. Compiled from various sources, the following are the objectives of PT Closed to conduct an IPO:

1. Getting Funds

Through the IPO, companies can get a large injection of funds because they get new investors by involving the general public. The capital that has been successfully entered is used by the company to continue to grow, from increasing operational costs to opening up new business opportunities.

2. Improving Financial Performance

After pocketing fresh funds through the IPO, the company can pay off debt and improve financial statements quickly

3. Expanding Business

Companies can expand their business with internal funds. However, by conducting an IPO, business expansion can be carried out faster and in the long term, the company's growth potential can be greater.

4. Improve company image

For companies that list their shares on the Indonesia Stock Exchange (IDX), information about related companies will often be covered by the media, data providers, and analysts in securities companies. The existence of these publications can increase the image and exposure of the company.

5. Increase Company Value

By becoming a public company whose shares are traded on the Indonesia Stock Exchange, the public can obtain data on the movement of the company's value at any time.

Any improvement in operational performance and financial performance will generally have an impact on the stock price on the Exchange, which in turn will increase the overall value of the company.

IPO Procedure in Stock Market

Illustration of trading on the stock market (Antara)

Companies need several stages or mechanisms to become public companies (Tbk). On average, a company takes between 3 to 12 months to be listed on the Indonesia Stock Exchange.

The first thing that a closed company must prepare to become a public company is the appointment of an underwriter or underwriter who is in charge of assisting a company with an IPO.

In the future, the underwriter will participate in evaluating the company's value to determine the value of the shares to be sold to the general public.

In the second stage, the company must prepare a number of documents, such as financial reports for the last few years, company profiles, future company plans, and legal opinions to be submitted to the IDX and the Financial Services Authority (OJK).

Next, the IDX will study all the documents submitted and make a visit to the company. In addition, IDX will also ask company management, underwriters, and other professionals to present why the IPO needs to be carried out.

If it meets the requirements, the IDX will provide principal approval in the form of a Preliminary Share Listing Agreement.

In the third stage, the company needs a Registration Statement and supporting documents, such as a prospectus, to the OJK.

If the OJK has issued a permit, the company can publish a brief prospectus in the media and make an initial offer (book building).

Furthermore, the company can conduct an IPO as well as register and trade shares on the IDX.

The IDX will also give approval and announce the listing of the company's shares, as well as the company's share code for trading purposes on the stock market. The IPO period or public offering of shares to the public is usually carried out for 1-15 working days.

This is the information on what an IPO is. Hope it will be useful!