The Primary Market (IPO)

Introduction

The primary market is the initial market where securities are first sold to the public by a company. This is where a company raises capital by offering its shares or bonds to investors.

The Overall IPO Process

Application

When a company decides to go public, it files an application with the Securities Commission (SC) or Bursa Malaysia to obtain approval for the IPO.

Allocation

Once approved, the company determines the number of shares to be offered and sets an offering price. Investors can then apply for these shares. The allocation process involves distributing the shares among the applicants based on various factors, such as the number of shares applied for and the investor's profile.

Listing

After the allocation process is complete, the shares are listed on a stock exchange, such as Bursa Malaysia. This means they are now available for trading in the secondary market.

Types of IPOs

There are three main types of IPOs:

1. Public Offerings

The most common type, where shares are offered to the general public through a prospectus.

2. Private Placements

Shares are sold to a select group of investors, often institutional investors, without a public prospectus.

3. Rights Issues

Existing shareholders are given the right to purchase additional shares at a discounted price, proportionate to their current holdings.

By understanding the primary market and the IPO process, investors can make informed decisions about participating in new offerings and potentially benefit from the growth of the issuing company.

Applying for an IPO in Malaysia

Retail Offering

• Eligibility: All eligible investors can apply for shares in the retail offering.
• Application Forms:
  • Pink Application Form: For directors, employees, and those who have contributed to the Group's success.
  • White Application Form: For individuals and non-individuals in the Malaysian public.
  • Electronic Share Application or Internet Share Application: For individuals in the Malaysian public.

Placement

• Selected Investors: Investors chosen by the Placement Agent will be contacted directly and provided with instructions.
• Bumiputera Investors: Bumiputera investors approved by MITI (Ministry of International Trade and Industry) will be contacted directly by MITI and given instructions.
• Dual Application: Selected investors and Bumiputera investors can still apply for shares in the retail offering using the White Application Form, Electronic Share Application, or Internet Share Application.

Conclusion

The primary market plays a crucial role in the capital formation process, allowing companies to raise funds by selling their securities directly to investors. The IPO process, which involves application, allocation, and listing, is a key component of the primary market. Understanding the different types of IPOs and the application process can help investors make informed decisions about participating in new offerings and potentially benefit from the growth of the issuing company.