Part 7: Issuance of Securities to the public for the first time (IPO).

Part 7: Issuance of Securities to the public for the first time (IPO).

Part 7: Issuance of Securities to the public for the first time (IPO)

As mentioned earlier, the concept first released to the public (IPO) is meant for the issuance of shares. Hence the following, we will mainly refer to the issue of shares to the public for the first time. 1. Conditions for issuance of securities ...

As mentioned earlier, the concept first released to the public (IPO) is meant for the issuance of shares. Hence the following, we will mainly refer to the issue of shares to the public for the first time.

1. Conditions for issuance of an initial public stock chungMoi countries have specific regulations for issuing securities to the public for the first time. However, to release to the public of securities issuers generally must be in the following basic conditions:

- About the size of which: issuer must meet the requirements for minimum capital initially, and after release to reach a certain percentage of equity held by the public and the amount of public participation.

- On the continuity of business operations: the company was founded and operate within a certain period (usually between 3 to 5 years).

- About the company management team: the company must have good management team, capable and qualified to manage manufacturing operations, the company's business.

- Back to business performance: the company must make a profit with lower profit levels and regulations in a certain number of consecutive years (usually 2-3 years).

- Regarding the feasibility of the project: the company must have viable projects in the use of funds raised.

However, developing countries often allow some exceptions, ie those businesses will be exempted above conditions, for example, companies operating in the public sector, infrastructure facilities can be exemption conditions of production and business efficiency.

in Vietnam, under the provisions of Decree 48/1998/-ND-CP on securities and stock market and Circular 01/1998/TT-UBCK guide 48/1998/-ND-CP Decree, the issuer to issue shares to the public for the first time must meet the following conditions:

- The minimum charter capital of 10 billion VND Vietnam;

- Operating profit in the last 2 consecutive years;

- Member of the Board of Directors and Managing Director (CEO) has business management experience.

- There are viable alternatives to the use of funds obtained from the issuance of shares.

- At least 20% of the equity of the issuer have been sold to more than 100 investors outside the issuer in case of equity issuers from 100 billion or more, the minimum rate 15% of the share capital of the issuer.

- Founding shareholders must hold at least 20% of the equity of the issuer and this must hold at least 3 years from the closing date of the issuance.

- Where shares are issued at par value exceeding 10 billion must have underwriting organization.

2. The advantages and disadvantages of issuing securities to the public.

a. The advantages

- Issue of securities to the public will create beautiful images and the popularity of the company, so the company will be easier and less costly than in raising capital through issuing bonds, shares in the next time. In addition, customers and suppliers of the company will often become shareholders of the company and therefore the company will be very helpful in the purchase of raw materials and consumer products.

- Issue of securities to the public will increase the net asset value, the company has been able to fund large and bank loans with preferential interest rates as well as the terms of the pledged assets will little more troublesome. For example, the shares of the public company is easily accepted assets pledged for bank loans. In addition, the issuance of securities to the public and help the company become a more attractive candidate for foreign companies as joint venture partners do.

- Issue of securities to the public, so that companies can attract and maintain good staff because when offering securities to the public, companies always take a certain percentage of securities for sale its employees. With stock options, employees of the company will become shareholders, and enjoy capital gains instead of ordinary income. This has made the company's employees to work more effectively and consider the success or failure of the company's success or failure is really his.

- Issue of securities to the public, the company has a good opportunity to build a professional management system and building a clear development strategy. The company is also easier to find a replacement, thereby creating continuity in management. Besides, the presence of the trustees are not directly involved in running the company also helps strengthen the checks and balances in the management and administration of the company.

- Issue of securities to the public to increase the quality and accuracy of the reports of the company because the company's reports must be prepared in accordance with standards issued by the General Administration regulations. It is this doing to assess and compare the performance of the company is made easier and more accurate.

b. The disadvantage

- Issue of shares to the public as dispersed ownership and may lose

companies controlled by the founding shareholders by active corporate takeovers. In addition, the ownership structure of the company has always been influenced by the volatility of the trading day.

- Costs of issuance of securities to the public high, 8-10%, representing funds raised, including underwriting costs, legal consultancy fees, printing costs, audit fees, expenses listing fees ... Also, every year the company also incur extra costs such as the cost of auditing the financial statements, the cost for the preparation of the document submitted to the State Administration of securities and the cost of periodic disclosure.

- Company to issue securities to the public must comply with the disclosure regime widely strict and closely supervised than other companies. Moreover, the publication of information on revenue, profitability, competitive position, mode of operation, material contracts, as well as the risk of leaking confidential information outside the company can take on unfavorable competitive position.

- Staff management company to take greater responsibility to the public. Also, due to the provisions of law, the transfer of their equity is often limited.

Part 1: Summary of Stock

Part 2: Introduction to stocks

Part 3: Introduction to Bonds

Part 4: Stock may convert

Part 5: Derivatives

Part 6: Primary Market

Part 7: First Issue of securities to the public (IPO)

Section 8: Process initial issuance of securities to the public

Section 9: Underwriting