CEBU, Philippines — Small and medium enterprises (SMEs) have many funding options for them to expand. One is going public.
Virgilio Chua, managing director for investment banking at SB Capital Investment Corp., a unit of Security Bank Corp., said that going into an initial public offering (IPO) isn't only for the big players.
Speaking before the Cebu business community at the Entrepreneurs Summit last week, he urged SMEs to consider IPO as among their financing options to expand.
"SMEs must broaden their minds as far as funding options are concerned," he said.
Chua said that more companies, including the small medium, going public would further develop the capital market.
He said that SMEs must be ready when they decide to become a publicly listed company as being one requires them to be transparent in every aspect of their operations.
Normally, he said the preparation for an IPO takes years
He also cited the need to become "compliant" in key areas such as financial statements.
Aside from an IPO, Chua also cited tapping the debt market through selling corporate notes to investors.
The Philippine Stock Exchange had been urging more SMEs to get publicly listed and eventually raise fresh funds for expansion.
For a company to be listed on the stock market's SME Board, it must have an authorized capital stock of P100 million, of which at least 25 percent is subscribed and fully paid.
Other requirements include cumulative earnings before interest, taxes, depreciation and amortization (EBITDA), excluding non-recurring items, of at least P15 million for three fiscal years immediately preceding the application for listing; positive EBITDA generated in at least two of the last three fiscal years, including the fiscal year immediately preceding the filing of the application; and the applicant company must be engaged in materially the same business and must have a proven track record of management throughout the last three years prior to the filing of the application for listing. (FREEMAN)