Indonesia's Financial Services Authority (OJK) Studying IPO Adjustments
The Financial Services Authority of Indonesia (Otoritas Jasa Keuangan, abbreviated OJK) is studying the possibility to raise the minimum ratio of shares that has to be offered to the public for an initial public offering (IPO) to 30 percent. Currently, a company that conducts an IPO on the Indonesia Stock Exchange (IDX) needs to offer at least 10 percent of its enlarged capital to the public. Previously, the stock exchange had suggested to raise the minimum ratio to 20 percent. However, the OJK seems eager to push the boundary higher.
On average, newly listed companies release around 20 percent of its shares when conducting an IPO on the Indonesia Stock Exchange. The OJK would like to see a higher ratio in order to foster liquidity in the stock market. Currently, many companies only want to offer a small portion of its stock equity to the public resulting in few stocks being transacted by a limited number of investors.
The director of the IDX, Ito Warsito, also said that the IDX and OJK are currently discussing the possibility of listing mining companies that have already received a Mining Business License (Izin Usaha Pertambangan/ IUP) but have not started production yet. By making it possible for these companies to list on the IDX, the mining companies are able to generate funds needed to start production after the exploration stage. Currently, many mining companies choose to list abroad (for example in Singapore or Australia) because they are not able to list on the IDX as the latter forces mining companies to be producing output at least for one full year before allowing them to conduct an IPO.
The OJK is also busy to ease regulations for conducting an IPO. By making it easier to become a listed company on the IDX, the OJK hopes to see more IPOs in the future. Up to 19 November 2013, 479 companies are listed on the IDX. This is a relatively small number compared to India (5,267), Japan (3,399), Malaysia (909) and Singapore (782).
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