Business

Wednesday November 18, 2009

The unique reasons why some companies list

Raison D'etre - By Risen Jayaseelan


IT used to be easier to understand why companies chose to list. Access to capital and establishing visibility, creditability and trust were, and still are the obvious reasons.

But the rasion d’etre for listing today seems to be changing. Or maybe, these reasons where always there. I just did not notice it.

Consider Maxis’ case. It is now speculated that one factor that influenced its decision to list here was to do a favour for the Government in bringing foreign investors to the Malaysian market.

Maxis has said that it placed out shares to leading foreign funds, some who were returning to Malaysia and 10 others who were first time investors here.

It is hard to make the case that was the primary reason for Maxis to list. But it only makes sense for companies like Maxis, which depend on the authorities for their licences to operate, to do their bit for the country.

Consider also CIMB’s dual listing in Thailand. It sure wasn’t done for access to capital. It was done to enhance its profile in the Thai market. But reading between the lines, it is likely CIMB’s listing in Thailand was also to appease the authorities there. The Thai stock exchange’s president said that CIMB’s listing would raise the profile of the Thai market in the eyes of fund managers worldwide.

To be sure, it is common practise else where that multinationals list in markets they operate in to appease the authorities.

That seems to be the case with Bangladesh, where Telenor ASA has listed its celco GrameenPhone Ltd. Government-owned Telenor certainly has little need for additional capital. Not only did GrameenPhone offer itself to be owned by at least 350,000 Bangladeshis (See previous commentary, The GrameePhone example, StarBiz, Nov 6, 2009), it also made the public offering at a very cheap price of 70 Bangladesh taka a piece, valuing the shares at three times GrameenPhone’s Ebitda (earnings before interest, tax, depreciation and amortisation).

No wonder the shares soared to almost three times its price on its debut on Bangladeshi’s stock exchange on Monday. That Bangladeshis, from retail investors to fund managers to those who run the stock exchange, must be happy with GrameenPhone for that. And by extension, the Norweigians have gotten some great brand building, not to mention enhancing their rapport with the authorities. Did they price their offering too low? Definitely. But that’s not the point. The goodwill they gain via this listing, especially in a poor country like Bangladesh, can’t really be measured in dollars and cents.

To be sure, GrameenPhone’s listing wasn’t entirely altruistic. It was also good financial management. Listed companies in Bangladesh enjoy a tax benefit – corporate tax is less 5 percentage points then normal. Not a bad idea at all. The listing now lets the man in the street benefit from participating in a growing industry. And it forces those that list to be more transparent about their operations. This would surely outweigh the small loss of tax revenue to the government. Perhaps this is something that Bursa Malaysia should consider.

● Deputy news editor Risen Jayaseelan is not questioning the ‘alternative’ reasons why companies list as he is slowly learning about the intricacies of doing business, especially in highly regulated sectors.

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