Friendly "Listing" Rules for Startups

The interest of startup companies to take a floor on the Indonesia Stock Exchange (IDX) as an option for obtaining external funds has not been in line with the high disbursement of investment coming from non-exchanges.

To overcome this, the IDX continues to relax the rules by starting to look at the rules that apply abroad, to be applied in Indonesia. One of the rules is to calculate the company's valuation based on revenue (revenue), intangible assets (non-tangible assets/NTA), and market capitalization (market cap).

EVP Head of Privatization, Startup, SME & Foreign Listing IDX Saptono Adi Junarso said that the three categories were taken from a study conducted by the IDX on activities listing startups on exchanges in various countries. Some of the countries that became benchmarking BEI such as Australia, the United States, and a number of countries in Asia.

Saptono gave an example, when a child wants to go to school to a higher level, he generally uses a report card as his main consideration, but now options are available, for example through the independent pathway, Interest and Ability Search (PMDK) or others.

"So, for example, if the report card is not good but seen from other aspects it can be fulfilled, then the IPO step can be taken you The report card is bad but if you want to be an athlete, you can do it through PMDK. If other aspects don't pass, we'll have to do it later," he said on the sidelines of the Startups #Go Public panel discussion, Wednesday (28/2).

Saptono continued, the country that became the benchmarking IDX are the countries with the highest number of startups listing most, such as Australia. However, not all rules will becopy outright because the IDX must consider from the surrounding regulations whether they are contradictory or not.

According to him, the selection process in adopting rules must be applied because not all rules match the characteristics in Indonesia. He gave an example, in the United States the rules apply Dual-Class Shares or No-Vote Shares for tech companies looking to take the floor.

The regulation, according to him, is quite controversial when applied in Indonesia, because many contradict the anti-money laundering and prevention of terrorism financing (AUPPT).

"Because we must always uphold the protection of investors, so that not just any company can IPO. We must pay attention to the existing norms and propriety."

Saptono emphasized that the three methods of calculating the valuation have not yet become a final decision because the stock exchange is still in the process of discussing it with OJK. Later, if relaxation can be realized, it will be stated in the rules issued by the IDX.

He hopes that the relaxation discourse can stimulate the enthusiasm of startup companies to start looking at the stock exchange as an option to get fresh funds. Although according to him, only by referring to the rules that are still in effect, it can actually be said to be friendly for startups. This can be seen from the emergence of two startup companies that have taken the floor last year, Kioson and M Cash.

"But if we see that there are [rules] that can be relaxed, we think it will be more flexible for potential issuers."

Startups are approaching

Saptono said that after two successful startups took the floor, the frequency with which startups contacted the IDX just to ask questions about IPOs increased quite sharply. However, no one has really taken it seriously and made a concrete decision to follow the steps of Kioson and M Cash.

The reason is that the questions asked are still just what the requirements for the IPO have not yet reached the stage of the current state of the company's health. So it is still gray about how much they want to hasten the execution of the IPO.

Some of the reasons behind this are because most of the startups that come to the IDX are not legal entities, while many of them are still in the form of CVs. Whereas the most important rule for companies to be able to take the floor is in the form of PT.

"We don't know how far they want to carry out the IPO. From the level of visits, we feel that the frequency has increased. Almost every day someone contacts us via email or comes in person."

Even Saptono admitted that startups that visited the IDX were not only from Jakarta, they had come from Bandung, Semarang and Surabaya. The high interest has made IDX to open an IDX Incubator outside Jakarta. The two cities selected by the IDX are Bandung and Surabaya.

"The city has a lot of potential for startups. We want to net as many members as possible so we can monitor their finances, guide their management to be more solid when ready for an IPO. In analogy, it's better to raise animals than hunt in the forest."

Remove the bad stigma

Being a public company with stock movements with high volatility, tends to create a bad stigma of "fried stocks". The easier the company can go to the floor, the easier it will be to "fry" the stock. The stigma is getting stronger in startups, which incidentally are companies that have not yet made a profit, but have dared to take the floor.

There are concerns when the company has taken the floor, but in a short time the company has even gone out of business first. This was vehemently denied by the panelists who were also present at the #Go Digital Startup discussion, presenting the Program Director of IDX Incubator Irmawati Amran, Director of Kresna Sekuritas Octavianus Budiyanto, and Director of M Cash Integration Marthin Suharlie.

"The closing of the company happened because the management was not good. The startup, after all, was a company. That's why in the incubator, we teach them to manage the business so that it stays alive. sustain"explained Irmawati Amran.

According to him, the term "fried stocks" will only occur when the company's fundamentals are not strong. What was promised in the prospectus at the first IPO, could not guarantee investors.

"When the company grows, the stock price will follow. So the fundamentals must be good from the start. Many say they want to be big before the IPO, but actually the better one is bigger because the IPO is better."

Saptono agrees with Irmawati's statement. "Fried stocks" occur when the spread of public shares is small, so the price can rise and fall drastically. The strategy to prevent this from happening is to enlarge the distribution of public shares, so that driving fried stocks requires a higher effort.

Regarding the controversy, IDX created two classification boards for listed issuers, a development board and a main board. The development board is intended for small companies with a minimum operating period of 12 months and net tangible assets of at least IDR 5 billion, which can be listed on the stock exchange.

On the board, issuers may come with financial statements that are still at a loss. However, with a note, the issuer has business projections and analysis that shows that at least two years after the IPO, it has made a profit.

A GO-JEK-class company with a valuation above US$1 billion will still be listed on the development board if it is still losing money, even though the net tangible asset value is more than Rp100 billion. This value is the minimum limit for issuers on the main board.