Indonesia Capital Market: New Share Listing Regulation at IDX

Author: Marshall Situmorang (Partner), Audria Putri (Senior Associate), Aniendita Rahmawati (Associate)

The Indonesia Stock Exchange (“IDX”), together with Financial Service Authority/Otoritas Jasa Keuangan (“OJK”), are currently finalizing a new provision which will amend IDX Board of Directors Decree No. Kep-00183/BEI/12-2018 on Securities Listing Regulation No. I-A on the General Provisions for the Listing of Equity Securities at IDX (“Draft of I-A Revised Regulation”).

Such proposed amendment to the current provision appears to provide a friendlier regulation to facilitate the upcoming listing of Online marketplace Bukalapak.com which is expected to first take advantage of the new regime IDX’s’ mainboard in August. GoTo the holding entity of ride hailing giant Gojek and marketplace operator Tokopedia, which is also the country’s biggest tech startup valued at $18 billion, should follow soon after.

The amendment to the current listing rules is aiming to make IDX as an attractive place for the initial Public Offering (“IPO”) for these technology companies. This is in order to lure more technology companies to done so in IDX instead of in other markets such as Singapore Stock Exchange or Hongkong Stock Exchange.

The following are some keynotes we have compiled from various resources on the proposed amendments of the current IDX listing regulation:

  1. IDX to Relax the Listing Requirements at IDX’s Mainboard: In the Draft of I-A Revised Regulation, IDX relaxes regulations to entice loss-making but highly sought-after fast-growth technology startups to choose IDX as their listing venue.
  2. Under the current regulation, prospective issuers are required to fulfill the following requirements to be registered on IDX’s mainboard:
    a. Having net tangible asset minimum of IDR100 billion Rupiahs;
    b. Having commenced the business for 3 (three) consecutive years; and
    c. Having record operating profit in the last financial year.

In the draft I-A new regulation, the IDX makes adjustments to allow 5 (five) alternative requirements to be satisfied by the prospective issuers, i.e. (i) tangible net assets and operating profit; (ii) the aggregate profit before tax for the last 2 (two) years and market capitalization value; (iii) income and market capitalization value; (iv) total assets and market capitalization value; (v) cumulative operating cash flow for the last 2 (two) years and market capitalization value.

This is expected to provide wider opportunities for Indonesian companies to be listed on the IDX’s mainboard.

  1. IDX to Adjust the Free Float Rules: The current listing regulation uses the term “public shares” or “public float”, which is determined based on the shareholders who are not a principal shareholder and a controller.
    IDX proposed to amend the aforementioned definition and uses the term “free float” on Draft of I-A Revised Regulation. However, the minimum free float percentage of 7.5% as stipulated under clause V.1 of the prevailing IDX regulation remains in effect under the new regulation.
  2. IDX to Allow Listing of Dual Class Shares Structure: Another major proposed amendment in the Draft of I-A Revised Regulation, is the implementation of Dual Class Shares Structure (“DCS”) with Multiple Voting Shares (“MVS”).
    The IDX is currently conducting legal research for the implementation of DCS and MVS in order to find the framework that allows best market practice for such structure. If IDX allows the DCS and MVS structure, it will follow suit the other global stock exchange markets that have allowed such structure. Many global tech companies have been listed with MVS structure including, Google, SEA Group (the holding entity of Shopee) and Alibaba.
    It is still however, remains to be seen as to whether of not IDX will allow these companies to go public with DCS and MVS structure.
    This rule allows MVS holders to have voting rights that are higher than their share of ownership. MVS is implemented to maintain control of the founders who are the key persons of the company.

We will provide further updates on this matter upon the enactment of the new listing regulation.