An Overview Of Equity Offerings Through Initial Public Offerings

• Published date: 06 March 2024
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Financial Services, Corporate and Company Law, Shareholders
• Law Firm: Chooi & Company
• Author: Leong Wei Chung

In the dynamic world of finance, companies often seek avenues for growth and expansion and one such pivotal milestone is the Initial Public Offering ("IPO"). In Malaysia, the IPO process is a strategic move for private limited companies to tap into the public market and raise capital, transforming themselves into publicly traded entities on Bursa Securities Malaysia Berhad ("Bursa Malaysia").

B. Opportunities for Companies

(a) Enhanced Public Image and Establishing Legitimacy

Listing on Bursa Malaysia is a pivotal move for private companies transitioning to public status providing improved visibility, credibility and access to diverse funding sources. This process opens doors to a broader investor community, strengthening its presence in the financial markets and instilling confidence through adherence to stringent listing requirements. Amongst other regulators, the exchange establishes a regulated framework for trading of listed shares, ensuring transparency and investor protection, thereby enhancing the overall vibrancy of Malaysia's capital market.

Interesting Note: In 2021, CTOS Digital Bhd attracted RM1.38 billion for its retail IPO tranche, the largest retail demand for an IPO since 2013. The IPO of the year also garnered 23 cornerstone investors in its book-building exercise, with renowned names such as Employees Provident Fund Board, Permodalan Nasional Bhd, Aberdeen Standard Investment, AIA, Eastspring Investments, FIL Investment Management and JP Morgan Asset Management.¹

(b) Dynamic Offerings

In conjunction with the IPO, companies have the flexibility to issue new shares to the market, thereby raising fresh capital for various purposes such as business expansion, asset acquisition, research and development, debt repayment and other strategic initiatives. In addition, in accordance with the rules of the exchange and other applicable laws, existing shareholders including founders and early investors of the companies may opt to sell and liquidate their holdings to the public or specific institutional investors, further diversifying the offering and facilitating the transition from private to public ownership.

Interesting Note: In 2020, Mr DIY Group (M) Bhd undertook one of the largest IPOs in Malaysia in the past decade, successfully raising RM1.5 billion. Notably, a substantial RM1.2 billion of this amount was raised through the offer for sales of shares by its existing shareholders.²

(c) Exploring Regional Horizons

The allure of an IPO extends...