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Wednesday, 02 March 2011 15:00 Anthony Balliano
In the second of his columns explaning financial terms, Anthony Galliano, chief executive officer of Cambodian Investment Management, tackles initial public offerings.
Transforming from a privately held business to a publicly listed company offers substantial benefits. Rather than borrowing, which has to be repaid with interest, a company can gain access to cash and long-term capital.
The initial public offering of shares generates significant interest and greatly elevates the reputation and profile of the listing company. With a heightened public profile, business opportunities may increase and brand awareness improves.
The value of the company may increase as investors usually place a premium over the book value of the company.
The listing company can attract high-quality personnel, especially if it offers employee share-ownership schemes and options.
Employee productivity and pride in the company generally improves with share ownership.
A listed company may acquire another company by exchanging its stock rather than using or borrowing cash, reducing the debt burden on the company’s balance sheet.
For the business owner of a privately held company, listing offers the capacity to monetise a portion or all of their shares, which is usually the highest potential payout in realising the value of their company ownership.
However, in order to list a company there are stringent rules and regulations which is probably the reason only three firms have initially been designated to float by the Cambodian government. The Securities and Exchanges Commission of Cambodia, which is the government authority that oversees the sale of securities, has issued a prakas on corporate governance for listed companies.
In order to make a public offering, a company must submit an issuer application and disclosure document.
The disclosure document will include general information, risk factors, use of proceeds, operational plans, asset valuations, related party transactions, compensation, financial statements, and determination of offering price.
In order to ensure an independent validation, a due diligence report is required by both a professional accounting firm and a law firm, registered with the SECC. This may present issues for listing candidates as business owners have rarely disclosed such sensitive information in the past and are accustomed to privacy in these matters.
The company must have a board of directors of at least five of which one fifth is independent.
The capital of the company must be at least 5 billion riels, the company must have earned a profit of 500 million riels in the latest financial year and 1 billion for the latest three financial years.
A licensed securities market operator must approve securities pricing, a challenge in itself given the lack of depth in this area in the market presently.
The transformation to list involves great preparation, embracing corporate governance, much greater disclosure, and acting in the best interest of all shareholders. This will be progressive and will eventually significantly change how companies are owned and managed.In the second of his columns explaning financial terms, Anthony Galliano, chief executive officer of Cambodian Investment Management, tackles initial public offerings.
TRANSFORMING from a privately held business to a publicly listed company offers substantial benefits. Rather than borrowing, which has to be repaid with interest, a company can gain access to cash and long-term capital.
The initial public offering of shares generates significant interest and greatly elevates the reputation and profile of the listing company. With a heightened public profile, business opportunities may increase and brand awareness improves.
The value of the company may increase as investors usually place a premium over the book value of the company.
The listing company can attract high-quality personnel, especially if it offers employee share-ownership schemes and options.
Employee productivity and pride in the company generally improves with share ownership.
A listed company may acquire another company by exchanging its stock rather than using or borrowing cash, reducing the debt burden on the company’s balance sheet.
For the business owner of a privately held company, listing offers the capacity to monetise a portion or all of their shares, which is usually the highest potential payout in realising the value of their company ownership.
However, in order to list a company there are stringent rules and regulations which is probably the reason only three firms have initially been designated to float by the Cambodian government. The Securities and Exchanges Commission of Cambodia, which is the government authority that oversees the sale of securities, has issued a prakas on corporate governance for listed companies.
In order to make a public offering, a company must submit an issuer application and disclosure document.
The disclosure document will include general information, risk factors, use of proceeds, operational plans, asset valuations, related party transactions, compensation, financial statements, and determination of offering price.
In order to ensure an independent validation, a due diligence report is required by both a professional accounting firm and a law firm, registered with the SECC. This may present issues for listing candidates as business owners have rarely disclosed such sensitive information in the past and are accustomed to privacy in these matters.
The company must have a board of directors of at least five of which one fifth is independent.
The capital of the company must be at least 5 billion riels, the company must have earned a profit of 500 million riels in the latest financial year and 1 billion for the latest three financial years.
A licensed securities market operator must approve securities pricing, a challenge in itself given the lack of depth in this area in the market presently.
The transformation to list involves great preparation, embracing corporate governance, much greater disclosure, and acting in the best interest of all shareholders. This will be progressive and will eventually significantly change how companies are owned and managed.
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