Interventions for SMEs and High Growth Companies through the GEM Portal

Statistics show that only 4% of SMEs have access to formal finance which comes at a high cost and they face stringent requirements to acquire loans. Hardly any funding options available on the market are best suitable for SMEs. The GEM Portal has some interventions that will enable SMEs and High Growth Enterprises to access more diverse funding options such as debt (long and short term), listing on FINSEC, opportunities for pre – IPO funding, IPO pathfinder and restricted offers.

Prospective SMEs complete an online application for raising capital through either equity listing on the FINSEC Exchange or through debt financing by investors. The interactive online form has an in-built comprehensive scoring and rating mechanism of each input by the applicant, indicating to the applicant how well they are doing and the prospects of their application. Applications that meet the predefined minimum score will be exposed to various providers of capital. 

An SME or High Growth Company can raise through an Initial Public Offering which can be defined as the first sale of shares by a private company to the public. It is generally offered by new firms that are looking for funds to grow and expand their businesses. Through this process, commonly known as floating, or going public, a privately held company is transformed into a public company. Initial public offerings can be used to raise new equity capital for the company concerned or to monetize the investments of private shareholders such as company founders or private equity investors. 

When an SME or High Growth company initiates the IPO process, a very specific set of events leading to the listing occurs. These events are usually undertaken through the guidance of the company’s Nominated Advisors who will coordinate meetings involving the various parties to the listing transaction. Other parties involved may include the sponsoring broker, transfer secretary, independent financial advisor and legal advisor. The GEM Portal makes it possible for SME s to have a remote interaction with all these experts in preparation for listing.

Information regarding the company is compiled, including financial performance and expected future operations. This becomes part of the company prospectus, which is circulated for review. The company files its prospectus with the relevant authorities including the exchange on which it intends to list and sets a timetable from when the offer opens to when it closes and the company lists. On receipt of the prospectus, investors are encouraged to go through the document in detail as it contains information about the company’s historical as well as future prospects. Where possible, potential investors should contact their financial advisors for expert advice.

In some instances, though not very common in our markets, an SME can offer its shares through a process known as private placement. This process involves the issue of shares, bonds or other securities to a few identified investors without opening up the offer to the general public as is the case during an IPO. While Listing by Introduction (LBI) allows a company to apply for listing without the conduct of an initial public offering (IPO) prior to the initial listing of the company’s securities on FINSEC. It applies to an application for listing of securities that are already issued or securities that will be issued upon listing, where no public offering will be undertaken. 

Listing by Introduction (LBI) allows an SME or High Growth company to apply for listing without the conduct of an initial public offering (IPO) prior to the initial listing of the company’s shares on FINSEC. It applies to an application for listing of shares that are already issued or shares that will be issued upon listing, where no public offering will be undertaken. 

When a company chooses to list by introduction, a pre-listing statement shall be published. This pre-listing statement is not an invitation to potential investors to subscribe for shares in the company, but is issued for the purposes of providing information to the public about the company. Investors will be able to buy shares in the secondary market trading of the company after the listing.

Listing by introduction on FINSEC helps to facilitate price discovery and market-value realisation, for Over-the-Counter traded and similar securities. Through market demand and supply forces together with an efficient information processing mechanism, buyers and sellers of securities listed on FINSEC are assured of transacting at fair prices. 

 

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