I attended a seminar entitled “IPO Process in Hong Kong & Role of Financial Adviser” on 7 Aug 2009 in Hong Kong Science & Technology Parks (HKSTP). The seminar introduced IPO qualifications and the way a financial adviser would assist a company to reach IPO milestone. Two speakers were Ms. Edwina Lee and Mr. Leo Wong whose service in the Anglo Chinese Group, which provides advisory services for mergers and acquisitions, raising capital, corporate reorganization and rescue, litigation support and regulatory compliance.
Benefit and draw back of IPO has been described as follows:
For Benefit, they are summarized as follows:
i) Benchmark of value,
ii) Increase profile & global awareness of the company,
iii) Monetization for current shareholder at IPO,
iv) Increase attention from lenders and institution,
v) Platform for employee retention & their incentive, etc
Draw backs are:
i) Exposure to public observation,
ii) Leak of competitive information,
iii) Potential legal liabilities,
iv) Short-term strategy,
v) Demanding continuing obligation (requested from HK Stock Exchange), etc.
IPO Qualification in Main Board and GEM were also briefed. Some actions done in pre-IPO preparation were listed below.
It should appoint a right team and get your house in order.
ii) Financial statement
iii) Business plan
iv) Target valuation
v) Equity story / positioning
vi) Appointment of adviser
Phase 2: IPO Preparation / Execution
i) Due diligence → Documentation
ii) Structure and logistics → Marketing preparation
Phase 3: Marketing & Pricing
The whole process needs 5 month theoretically, and 9 month typically.
The role of financial adviser is mainly on problem resolution. It includes pricing, capital commitment, valuation disagreement, listing venue, sensitive disclosure, etc.
IPO team members included Bookrunners, Lawyer, Accountants, and others (Financial PR, Junior Syndicate Members, Printers, etc.).
The key element of an equity story is good positioning which helps promoting the merits of the company and marketing momentum of the IPO process. The cycle may be:
Market share → Management → Track record → Technology → Earning / Profitability → Dividend yield → Growth → Established franchise
After the seminar, I understood that IPO is a long journey and key milestone for company success. Many technology companies in HKSTP would be diligent to achieve IPO process.