The Securities and Exchange Commission of Pakistan (SECP) has taken several new initiatives to promote capital formation through Initial Public Offering (IPO) market and make the entire public offering process more efficient and cost-effective.
The SECP has finalized a document on IPOs in this regard.
The SECP informed the investors that the Initial Public Offering (IPO) is the first-time sale of securities by the public unlisted company to the public. It is one of the modes of fundraising by the corporates to meet their financial needs.
The principal purpose of the IPO is to raise additional capital to meet funding requirements. Additional capital may be required for expansion, acquisition of a competitor, vertical integration, horizontal integration, working capital, modernization, etc. Moreover, it also provides an exit to sponsors/venture capital funds to achieve some liquidity on their original investments. IPO can also help promote the culture of corporate governance and transparency within the organizational structure.
The SECP has introduced enabling framework for Special Purpose Acquisition Companies (SPAC). SPAC enables investors/public to co-invest with sophisticated, highly experienced managers and benefit from the appreciation in the share value of acquired units. One SPAC has been registered, however, no transaction has matured as of date. SPAC can promote merger and acquisition transactions, thereby, creating synergies and promoting economic development.
Based on the research conducted, the SECP is of the view that the IPO process, listing, and other related requirements in Pakistan are most conducive as compared to other comparable jurisdictions like Hong Kong, Malaysia, and India.
Regulatory amendment(s) has led to an increase in the number of listings. During the fiscal year 2021, 10 companies have tapped the IPO market as compared to a single company during the corresponding period last year, SECP said.
To increase the outreach of an IPO, the Public offering process for the subscription of securities has been automated. For this purpose, SECP, in coordination with PSX, has introduced a PSX e-IPO system, through which IPO investors, including individual investors, corporate investors, and Roshan Digital Account holders, can submit IPO applications and pay subscription money electronically. Moreover, brokers and banks have also been allowed to submit IPO applications and pay subscription money on the behalf of their clients.
Resultantly, over 80-85 percent of IPO applications have been received through the e-IPO channel. 5,835 new investors have joined the capital market through e-IPO.
To shift from the traditional and manual method of processing listing/IPO applications, SECP, in coordination with PSX, has deployed an online system named “PRIDE”, through which Issuers/companies can submit IPO applications, interact with PSX and get updates/status of the application.
PRIDE has been operational and several applications are being processed through it. It would help reduce processing timelines and act as a one-stop solution for IPO/listing of securities providing all stakeholders, including the Consultant to the Issue, Issuer, and investors, access to homogenous listing status and approval information, SECP document added.