The Indonesian capital market remains a key alternative for corporate\nfunding while providing more investment options for the public. As of\nthe end of August 2024, the IDX recorded that seven companies have\nofficially listed their shares on the Exchange, raising a total of\nRp2.16 trillion, with seven more companies currently in the IPO\npipeline.<\/p>\n
The Head of the IDX Listed Company Development Division, Listyorini\nDian Pratiwi, believes that the increasing number and scale of companies\nconducting IPOs indicates that the Indonesian capital market remains an\nattractive funding choice for the business world. \u201cThe growing number of\nlisted companies also provides more investment alternatives for the\npublic as a means of portfolio diversification,\u201d she stated.<\/p>\n
Rising IPO activity has also captured investor attention. Whenever a\ncompany lists on the IDX, market enthusiasm typically increases, and\nmany stocks see price increases on their first day of trading. This\ncondition often leads to the assumption that investing in IPO stocks is\nalways profitable.<\/p>\n
However, price increases during early trading do not necessarily\nreflect a company\u2019s fundamental value or guarantee long-term stock\nperformance. Once listed on the Exchange, share prices move according to\nsupply and demand mechanisms and are influenced by various factors,\nincluding company performance, industry conditions, the economy, and\nmarket sentiment. Therefore, investment decisions should not be based\nsolely on market euphoria, but through thorough analysis to align with\neach investor\u2019s investment objectives and risk profile.<\/p>\n
Listyorini also believes that an IPO should not be viewed merely as a\nmoment on the first day of trading or the end of a company\u2019s journey.\nAccording to her, an IPO is the starting point for a company\u2019s growth in\nthe Indonesian capital market. \u201cAfter conducting an IPO, companies are\nexpected to undertake further corporate actions in the following years,\ngrow alongside the Indonesian capital market, and utilise the capital\nmarket as a \u2018house of growth\u2019 to support sustainable business\ndevelopment,\u201d she explained.<\/p>\n
Here is what needs to be considered before buying IPO shares:<\/p>\n
Listyorini suggests that the first step is to study the company\u2019s\nprospectus. This document is the primary source of information\ncontaining the company profile, business sector, financial condition,\nbusiness strategy, use of IPO proceeds, and various potential risks. By\nunderstanding this information, investors can gain a more complete\npicture of the company\u2019s quality and future business prospects.\nInvestors also need to scrutinise how the IPO proceeds will be used,\nwhether for business expansion, capital expenditure, debt repayment, or\nother needs according to the company\u2019s plan. In addition to\nunderstanding the use of funds stated in the prospectus, post-listing,\ninvestors must continue to monitor the realisation of these funds\nthrough the Report on the Realisation of Use of Funds (LRPD), as\nregulated by OJK Regulation No.\u00a040 of 2025 regarding the Use of Proceeds\nfrom Public Offerings.<\/p>\n
In addition to reading the prospectus, investors need to understand\nhow the company operates and generates revenue. Key aspects to note\ninclude target markets, revenue sources, competitive advantages, and the\ncompany\u2019s strategy for business development. Equally important is\nassessing the prospects of the industry in which the company operates.\nCompanies with clear business models in industries with growth\nopportunities may have room to expand, though risks and uncertainties\nmust still be considered.<\/p>\n
Scrutinise stock valuation and business prospects, not just the\nstock price he price offered in an IPO cannot be the sole basis for\ndetermining whether a stock is cheap or expensive. Investors need to\nview the price in the context of the company\u2019s value and fundamentals.\nOne approach is to compare the company\u2019s valuation with other listed\ncompanies that have similar characteristics or operate in the same\nsector. Investors can consider several ratios, such as the Price to\nEarnings Ratio (PER) or Price to Book Value (PBV), while paying\nattention to the specific characteristics and business prospects of each\ncompany. \u201cThe main goal in assessing IPO stocks is not merely to find\ncheap stocks, but to ensure that the offered price is proportionate to\nthe fundamentals and future growth potential of the company,\u201d explained\nListyorini.<\/p><\/li>\n
Recognise various investment risks<\/p><\/li>\n<\/ol>\n
IPO stocks still carry investment risks. As companies newly entering\nthe capital market, the performance of listed companies can be\ninfluenced by various factors, both internal to the company and from\nbroader economic and industry conditions. Furthermore, share prices\nafter listing on the Exchange can be volatile, following market supply\nand demand mechanisms. Therefore, investors need to have realistic\nexpectations and avoid making decisions based solely on short-term price\nmovements. Rather than focusing on the euphoria when stocks begin\ntrading, investors can utilise the IPO momentum to build a\nhigher-quality portfolio through comprehensive analysis. By reading the\nprospectus, understanding the business model, assessing valuation, and\nrecognising existing risks, investors can make more rational and\nmeasured investment decisions.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/understand-what-an-ipo-is-before-investing-1789836711", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }