Planning an IPO? Pamela Lim Shares 4 Key Action Steps

Starting her entrepreneurial journey in 1998 as a supplier of e-commerce software to the financial industry, Pamela Lim achieved resounding success and profits within the first few months of the company’s launch. EBIZ Solutions, the company she co-founded, began operations with only $10,000 and three employees.

The company’s clients included high-profile names like Citibank, OCBC, GK Goh, Kim Eng Securities, Sun Hung Kai in Hong Kong and Softbank in Japan. EBIZ Solutions’ main product was software for the mobile trading of stocks and forex. It was an entirely new concept back in 1998 and led to the company’s immediate acceptance by the market.

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Pamela Lim recently did an interview here at SeedIn on how to take your company to IPO.

1. Have a solid reason why you need the cash

In 2000, Pamela got her approval for a first level duo listing on NASDAQ and SGX. This was a record for a Singapore-based company. 3rd Frontier was doing well, but Pamela decided to go in for an IPO as she wanted more funds for business expansions.

She explains that by 2000, the company had grown in size but it required vast amounts of funds to be able to compete with established software businesses that had hundreds of millions of dollars available with them.

3rd Frontier’s sales revenues, profits and growth prospects formed an attractive proposition for investors. But every company has a different story that it needs to examine before deciding to go IPO.

Example:

In the case of LendingClub, an online lending platform, there was scope for rapid expansion but the company did not have the funds to push ahead with its marketing plans.

LendingClub launched its services in 2007, matching consumers and small business borrowers with individual and institutional investors. By the time it approached the market with its IPO, it had already facilitated $5 billion in loans.

The company’s IPO was a major success with $870 million being raised. The issue, which had been priced at $15 per share closed its first day of trading at $23.43.

2. Plan well in advance

Pamela Lim’s 3rd Frontier was a market leader in its field. It had a clear technological advantage, blue-chip customers and was growing revenues and profits at 25% per quarter.

All these factors made it an ideal candidate for an IPO. Every organisation that decides to go public may not have similar advantages.

But it is important to plan well ahead and build up the resources to make a success of your IPO when you eventually decide to take the plunge. Your preparatory work will stand you in good stead.

Example:

Fullerton Healthcare Corp., a provider of medical services to corporate workers in Asia, is reported to be planning an IPO in Singapore. Although the company has not announced its plans officially, several agencies have reported that it needs funds for expansion.

In May, it bought radiology service provider Radlink-Asia Pte and it has also agreed to buy Hong Kong’s HMMP Ltd. a chain of health-care clinics.

Tracing its origin to the 1950s, Fullerton Healthcare has 130 fully-owned medical centres and operates in Hong Kong, Malaysia, Singapore, Indonesia, and Australia. With its long and successful history, and recent inorganic expansion it has ideally positioned itself for an IPO.

3. Assemble the right team for IPO

The success of an IPO depends upon the strength of a company’s business model and its past track record.

But regardless of how well a company has done financially or how bright its prospects are, its IPO needs the right investment banker, a competent auditor and an experienced accounts team to perform well.

It is advisable that a company plan for its IPO as early as possible. This will give it time to ensure that its accounting issues are suitably addressed and in conformity with statutory requirements.

The legal team and auditors play a crucial role as they ensure that the prospectus has all the necessary financial disclosures.

It is important to remember that external agencies like the investment banker and the auditor can only work with the data and information that is furnished to them. It is up to the company to examine its working and business prospects and provide an adequate level of information.

Example:

Accordia Golf Co., Japan’s largest golf-course operator, completed an IPO in Singapore last year. The IPO of $626 million was subscribed 0.91 times. That was a respectable showing in a tough market and also a reflection of the size of the IPO.

The company had utilized the services of Daiwa Capital Markets and Citigroup as investment bankers and Deloitte & Touche as its accountants. PricewaterhouseCoopers were the company’s auditors.

The necessity of having top-notch investment bankers and auditors for a company’s IPO cannot be overemphasised. They can make the difference between a successful IPO and one which fails.

Senior members of the company’s management team will have to spend great amounts of time with the auditors, investment bankers and lawyers. This is an essential requirement if the company wants to prepare itself adequately for the IPO. An organisation can ignore this only at its own peril.

4. Establish your story

An IPO will succeed only if the company can demonstrate that it has identified an unfulfilled market demand and has the capability of satisfying it.

Example:

LendingClub realised that soon after the great financial recession of 2008, traditional banks had become over-cautious and were reluctant to provide finance even to borrowers with sound repayment capabilities.

Additionally, investors were unable to get good returns from banks. LendingClub capitalised on this opportunity by providing an online platform to match borrowers and lenders.

This innovative marketplace model proved itself from 2008 up to the time of the IPO in 2014. In the second quarter of 2014, just a few months prior to the IPO, LendingClub did a business volume of $1 billion.

All these factors served to convince investors that online lending marketplaces had a sound business model and that LendingClub was well-positioned to command a large part of the business.