With M Cash Shares Soaring After IPO, Will More Start-Ups Go Public?
Jakarta. Shares of M Cash Integrasi, an online voucher distributor, closed nearly 25 percent higher on Thursday (11/02), showing investors' appetite on the newly listed tech start-up, after its initial public offering on Wednesday.
M Cash is the second technology start-up paving its way into domestic market, following online-to-offline firm Kioson, which debuted last month.
Traded under the ticker symbol MCAS, the company raised more than Rp 300 billion ($22.23 million) by selling 216.98 million shares, equivalent to 25 percent of the company's total share base, at Rp 1,385 a piece. The offering was more than 10 times oversubscribed.
M Cash, which is controlled by an investment management firm Kresna Graha Investama, surged in value to Rp 2,070 per share during its trading debut.
"The IPO is the company's starting point to further strive for start-up growth in Indonesia and on the global scale. A new era has just begun and we want to take part in driving the country's digital economy," M Cash Integrasi president commissioner Michael Steven said.
At least 60 percent of the IPO's proceeds will be used for next year's working capital, while 30 percent will be allocated to buy software, technology infrastructure and automated machines. The remainder will be allocated for human resources competency.
The company plans to operate 4,000 offline stores by the end of 2018, and 10,000 offline stores by 2020. M Cash currently operates 1,000 offline stores across the country. It offers IT solution services, including mobile phone top up vouchers, travel booking and e-tickets.
Do Tech Firms Shy Away From IPO Due to Profit Loss?
The Indonesian start-up industry is burgeoning as the country undergoes increasing internet penetration, reinforced by its fast growing economy and population. This lures investors to become part of Indonesia's thriving start-up ecosystem.Although Indonesian startups have a great potential to accelerate their business growth, most of them are not showing signs of making any profit.
According to Aulia Marinto, president director at e-commerce company Blanja.com, going public is the ultimate goal of all small companies. But they fear failure.
"Only 'healthy' companies can have a successful IPO. But, certainly, it does not mean that companies that haven't gone public are 'unhealthy,'" Aulia told the Jakarta Globe.
Once a start-up conducts an initial public offering, it is regarded as profitable and equipped with a long-term business strategy. However, according to Wilson Cuaca, managing partner at venture capital firm East Ventures, start-ups also shy away from the IPO path, as going public does not allow them to keep their financial reports private.
"Venture capital firms will remain the main source of funding for start-ups ... because start-ups can keep their information private and that's an advantage in the competitive industry," Willson said.
This is why start-ups prefer mergers, acquisitions or having investors inject capital into them.
Jasin Halim, the chief executive of Kioson, said the company had received funding offers from investors, but decided to sell its shares to the public due to valuation differences.
"The path that start-ups take is normally to look for venture capital, angel investors and so on ... We feel that by taking the IPO route, that's the method that is the fairest and transparent. Let the market value our company," he said, as quoted by Reuters .
Chief executive and co-founder of chatbot provider Kata.ai, Irzan Raditya, said the IPOs of Kioson and M Cash are a breakthrough, which can encourage more start-ups to go public."However, we still have a long way to go before we decide to go public," he said, referring to Kata.ai.
Irzan said his company has just received $3.5 million series A from venture capital firm Trans-Pacific Technology Fund Taiwan, which it will use for talent acquisition.
Government Support
The Financial Services Authority (OJK) issued a regulation in July to ease small and medium enterprises seeking funding from the capital market. In the first half of next year OJK will simplify the requirements that small enterprises must meet to go public.
Indonesia Stock Exchange president director Tito Sulistio said start-ups "do not need to go big" before conducting an IPO.
"We support them to go for the IPO, and we facilitate their preparations," he said.
According to Tito, there is no requirement for a company to be profitable to conduct an IPO. But it needs to record a profit in two years after selling its shares to the public.
"In the near future, there will be more startups going for an initial public offering ... But [now] capital funding from venture capital firms is still their main choice," said East Ventures' Wilson.
Additional reporting by Reuters.
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