Why Kioson and M Cash Prefer "Go Public"?

The first week of October we received further news about two startup companies which coincidentally held an initial public offering (initial public offering/IPO) on the Indonesia Stock Exchange (IDX) in the near future.

Kioson with the code KIOS, was officially listed as the 24th issuer this year on Thursday (5/10). Meanwhile, M Cash just held a public expose (6/10) to announce plans listing on the IDX on October 31, 2017.

These two technology companies, which are still classified as startups, provide a new breakthrough and enthusiasm that startups can take funding options from capital market funds. Startups can get fresh funds outside the standard way, which is generally obtained through venture capital or private equity (PE) with series stages without limitation.

When a company is listed on the IDX, they have the opportunity to raise fresh funds by choosing two options, namely issuing new shares (rights issue) or debt securities (bonds and sukuk). Because there are public shares there, the company must be responsible by disclosing all performance and reporting it regularly to the regulator.

The difference is in stark contrast to when startups still use fundraising, starting from the early stages, pre-series A, series A, to holding status unicorn. They will tend to be closed with the performance and ownership of the company's shares. This is commonplace and no one can force them to open up, except for investors or potential investors.

"For companies, when they get public funds it will be easier to scaling. Indeed, in terms of operational costs, there is an extra burden, but on the one hand, taxation and the utilization of shares as a guarantee tool will make it much easier for them," explained Managing Director of Ideosource Andi S Boediman.

Then from the issuer's treatment of investors, it will be much fairer because all shareholders become common-share (common stockholders). The case is different if the company is still closed which still distinguishes the two types of shareholders, by still owning preferred shares.

Preferred stock means that if the company's shares are liquidated, then the shareholder can immediately receive a share in advance of the common shareholder.

"IPO is a cheap alternative compared to using other methods. From the investor side, we see it as positive because old investors get liquidity that can be used to invest elsewhere. This is what happened with Ideosource. Incidentally, I was an investor indirect in one of the companies that M Cash later acquired, then our shares were exchanged for shares. This is so win-win solution."

Encourage startups to do things disruptive

Founder and CEO of Kioson Jasin Halim said that choosing an IPO was the final result the company chose after it reached a dead end when it met with various foreign investors. It is stated that there is a difference in the calculation of the company's valuation value.

"Many startups use fundraising with series A, series B. We tried to use this route but it didn't arrive. Because there are considerations, where our valuation and what they calculated are different. So it doesn't match," he said while talking to the media.

He continued, "When we try to learn about IPOs, it's not taboo. Why not try a way that startups don't usually do, we use a method that disruptive. We also try disrupt market for no longer secrecy. We will comply with Corporate Governance, information disclosure, because we have become a public company."

Jasin explained that at least in the next year his party has not thought about other corporate actions to seek fresh funds. Kioson is currently still focusing on developing products and services vertically and horizontally as an effort to improve performance in order to gain the trust of investors.

"There are no plans yet due to raising funding must look at the company's needs and how the financial condition is strategic for rights issue."

Meanwhile, the IPO step for M Cash is a sign that the company's maturity point has been reached from being a startup. There is also an influence that is transmitted by one of the shareholders of M Cash, namely Kresna Graha Investama, which incidentally is an investment issuer.

According to him, becoming an issuer will trigger the emergence of new ideas considering that there are many new investors who want to synergize with each other.

"There are two reasons that pushed us to IPO. First, from Kresna Graha, share holders we. Two, because we see that entering the capital market makes our accountability more transparent and can be enjoyed by many people," said M Cash CEO Martin Suharlie.

High interest, prices keep going up

The high public interest in Kioson as the first startup on the IDX is quite reflected in the share offering process, the company's stock orders are experiencing excess demand (oversubscribed) more than 10 times the number of shares offered.

The stock price of KIOS continues to show a strengthening from the initial offering price of Rp.300 to Rp.700 per share, in the second trading session which was closed this afternoon (9/10).

Kioson's initial goal was to conduct an IPO because the company wanted to use the fresh funds it got for business expansion, not debt restructuring.

"If the goal is to restructure debt, actually for some investors it will be less attractive. It's different if the goal is for business expansion, meaning that there are bright prospects offered by the company," said Binaartha Securities analyst Muhammad Nafan Aji Gusta, when contacted separately by DailySocial.

He continued the movement of Kioson's stock which tends to strengthen, which is a common indication when a new company is on the floor. However, what needs to be considered is future market volatility, the composition between supply and demand must be guarded.

"Because it's just on the floor, the stock price continues to strengthen. That means there's still more to come demand than supply. If the price continues to decline, it means that investors are starting to profit taking out of concern for the fundamentals of the company itself."

Seeing the progress of Kioson and M Cash on the IDX, Andi revealed that at least two startups are serious about conducting an IPO as an option to get fresh funding. Although he did not mention the two company identities, Andi only said that the two companies still have the same business segment as Kioson and M Cash.

"Just wait for next year. There are one or two serious startups prepare for IPOs. Still E-commerce how come, just see how next year, "concluded Andi.