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)