Firms warned on use of initial offering funds
Firms warned on use of initial offering funds
JAKARTA (JP): Chairman of the Capital Market Supervisory Agency (Bapepam) Bacelius Ruru warned public companies yesterday to use the proceeds of public offerings in accordance with their initial plans.
"If necessary, Bapepam will ask an independent auditor to verify whether or not the initial public offering (IPO) proceeds have been used according to prospectus," he told an annual meeting of the Association of Indonesian Public Companies (AEI).
The Bapepam chairman reiterated that the utilization of public offering proceeds should be reported to Bapepam every three months to ensure that all funds raised from the public are used according to the promises made in the prospectus.
Ruru's remarks were made following recent allegations of misuse of the proceeds of public offerings.
"Share issuers must keep their promises as stated in the prospectus," he told 200 executives of the publicly listed companies attending the meeting.
Ruru said that in the use of public offering proceeds, share issuers could deviate from the activities listed in the prospectus only in the case of "a forced measure."
In such a case a share issuer is required to publicly announce both the new plan and the reason why the initial plan could not be fully adhered to, he said.
"In addition, any change is subject to approval from the shareholders," Ruru said.
Derivatives
The Bapepam chairman also warned publicly listed companies to be careful about investing in high-risk derivatives of financial instruments offered in overseas markets.
"Know first before you buy these derivatives," he said. "The instruments are new, they carry high risks," he warned the directors about the by-products of financial instruments, such as warrants.
Two local companies, both listed on the Jakarta Stock Exchange, were reported late last year to have suffered a massive loss from their investment in derivative products overseas.
Ruru said that Bapepam and Bank Indonesia (the central bank) were in agreement on the need for the activities of local companies in margin trading abroad to be closely monitored.
In his address, the Bapepam chairman called on publicly listed companies to improve the liquidity of their stocks on the trading floor.
He asked the companies to make their stocks more attractive in a bid to improve liquidity and cited the issuance of bonus shares and share splitting as possible means of doing so.
"But the most important thing is to improve public confidence in the (public) companies," he said, adding that improving business performance was the most effective way of making stocks more attractive to investors.
One executive of a publicly listed company said that improving the liquidity of shares on the stock market is beyond the control of their issuers.
"It is the market that determines trading activities," she said, responding to Ruru's call for an improvement in the liquidity of sleeping stocks. (hen)