Companies told to think it through before going international
Companies told to think it through before going international
JAKARTA (JP): International financial analysts foresee great
interest among investors in New York in buying shares of high-
quality companies from Indonesia.
The analysts from New York who spoke as panelists at a
conference here yesterday observed that since Indonesia is part
of the robustly-growing East Asian economy, investors are excited
about taking part in that growth.
"There has been a strong surge in Asian share listings on the
New York Stock Exchange (NYSE) and those shares provide high
rates of return," said Matthew T. Freemont-Smith, an executive of
the New York-based Goldman Sachs financial company.
They cautioned, however, that companies should first
thoroughly consider the costs and benefits of listing their
shares on such international exchanges as the NYSE.
"You should have a very strong reason for listing in New
York," cautioned John Bober of Arthur Anderson accountancy and
consulting firm.
Bober, Freemont-Smith and Boyd C. Lees of the Bank of New York
briefed the hundreds of businessmen who filled the conference
room to capacity on the tough requirements for share listings on
NYSE and the responsibility the issuers should bear after
listing.
The conference, organized by the Financial Club and Arthur
Andersen/SGV-Indonesia, discussed the trends, options and
challenges for Indonesian companies intending to go
international.
The central theme of the meeting was extremely timely in view
of the Indonesian government's plan to list the best state
companies either on the New York or London stock markets.
The government has selected PT Indosat -- the international
telecommunications monopoly -- to be the first state company to
go international through sales of roughly 25 percent of its
shares.
The panelists agreed that listing on NYSE provides many
benefits because it is the most prestigious stock exchange in the
world and offers the largest investor base.
"Listing in New York could become a showcase vehicle for the
Indonesian economy," Freemont-Smith noted.
Advantage
He added, however, that viewed from investors' interests it
would be an advantage for Indonesian companies intending to go
international to first have their shares listed on the domestic
stock market.
"Listing on the home country market will provide potential
investors overseas with a benchmark evaluation and established
local sources of information about the company," Freemont-Smith
added.
Earlier, at the opening of the conference, Bacelius Ruru,
Chairman of the Capital Market Supervisory Agency, again urged
Indonesian companies to first list on the domestic stock
exchanges if they intend to go public.
"A decision to go international should be made only after it
is determined that an offering on the domestic market alone does
not meet a company's full range of financing objectives."
Ruru therefore suggested that selling shares in New York
preferably be made through the American Depository Receipts (ADR)
instead of direct public offerings because the former method has
direct links to the domestic stock market.
ADR serves as recipient of the shares of non-resident
companies held in the vault of a U.S. bank and entitles the
shareholders to all dividends and capital gains.
According to Ruru, listing through the ADR is less costly and
less time-consuming than direct public offerings, but still
provides similar advantages such as access to equity financing,
liquidity and visibility.
He cautioned that direct public offerings on international
stock markets subject share issuers to high levels of scrutiny by
sophisticated members of the investing public, as well as
stringent requirements for disclosures and financial reporting.
"Furthermore, listed companies in New York must maintain
investor relations. Therefore, you should take a hard look early
in the process before going international," Bober cautioned.
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