Malaysian Investors' Association cited costs savings as the main benefit of launching IPOs on the Net.
KUALA LUMPUR (Asia Pulse) - The time has come for regulatory authorities, the financial sector, issuing houses, market players and investors to look critically at the concept of Initial Public Offers (IPOs) via internet, according to the Malaysian Investors' Association.
Technology for Internet IPOs is already available whereby subscribers could key in their subscriptions and instruct their bankers to pay directly to the issuing house, it said. "Prior to subscription, potential subscribers could also read the prospectus via internet browser," it said in its memorandum presented for Majlis Dialog Belanjawan 2001.
It noted that the Internet IPOs might eventually save cost for companies offering the IPOs, since normal IPO exercise itself was costly where expenditure could run up to RM1 million (US$263.15 million) for a medium-size company. MIA's memorandum also looked at issues in general concerning the quality aspect of IPOs. It suggested that quality IPOs were far more important than quantity IPOs.
"During the last financial crisis, we (MIA) have seen some of the newly listed companies (in less than three years after their listings) come under "Court Special Administrators" of Section 176 of the Companies Act, with poor corporate fundamentals in them," it said. It noted that funds raised in the IPOs were not effectively put into productive investments, resulting in higher level of debts instead of lower borrowings.
Some of these companies, the association said, came under restructuring and capital reduction as low as 15 old shares for one new share. "Very often, the public investors and the employees become the victims," MIA said. As IPOs are a form of distribution of wealth, instead of enriching citizens of the nation, some of the IPOs after a few years of listings had to undergo corporate restructuring. This had resulted in the minority shareholders becoming poorer, it added.