Steps for Preparing for Listing on the Stock Exchange of Thailand
Overview of Stock Exchange Registration
Registering on the stock exchange is a major milestone for companies aiming to grow and expand their business, as it allows them to raise funds directly from public investors. This capital can be used as working capital or to expand operations, without the burden of repaying principal and interest, as would be required with loans from financial institutions.
The key benefits for companies listing on the stock exchange include:
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Long-term Funding Source: Companies can raise capital to support long-term investments or business expansion without the costs associated with interest payments and principal repayment.
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Enhanced Image and Credibility: Being a listed company boosts public recognition and credibility, as companies must comply with various regulations and standards, including transparent and verifiable information disclosure.
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Increased Business Opportunities: Listed companies have greater opportunities to attract and collaborate with business partners domestically and internationally, supporting growth and strengthening business resilience.
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Improved Management Practices: Listing encourages companies to adopt standard accounting practices and robust internal control systems, enhancing operational efficiency and promoting professional management.
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Attracting and Retaining Talent: Listed companies are better positioned to attract and retain high-quality employees, offering attractive compensation such as Employee Joint Investment Programs (EJIP) or Employee Stock Ownership Plans (ESOP).
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Liquidity for Shareholders: Shares of listed companies can be easily traded on the stock exchange, allowing shareholders to convert their holdings into cash swiftly and conveniently.
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Tax Benefits: Listed companies may receive certain tax benefits, such as corporate income tax deductions. Additionally, individual shareholders may be exempt from capital gains tax on profits from selling securities on the stock exchange.
Listing on the stock exchange is thus a pivotal step that enables companies to achieve significant growth, create value for shareholders, and build a sustainable foundation for competing on the global stage.
Organizational Readiness Assessment
An organizational readiness assessment is a crucial step in preparing for a stock exchange listing. Companies need to consider essential qualifications, analyze strengths and weaknesses, and adjust their organizational structure appropriately.
Essential Qualifications (Effective from January 1, 2025)- Paid-Up Capital: For listing on the Stock Exchange of Thailand (SET), the company must have a paid-up capital of at least THB 100 million. For the Market for Alternative Investment (mai), the paid-up capital should be at least THB 50 million.
- Operational Performance: For SET, the company must have a cumulative net profit of at least THB 125 million over the past 2-3 years, with at least THB 75 million in the most recent year. For mai, the company should have a net profit of more than THB 25 million in the latest year and a cumulative profit over the past 2-3 years totaling at least THB 40 million.
- Public Shareholding Distribution: For SET, there must be at least 1,000 minority shareholders. For mai, there must be at least 300 minority shareholders, collectively holding 20-30% of the paid-up registered capital.
Business Strengths and Weaknesses Analysis
- Strengths: Assess competitive advantages, market share, and unique technology or innovations.
- Weaknesses: Analyze capital constraints, human resource limitations, or management systems needing improvement.
- Opportunities: Consider market trends and business expansion potential.
- Threats: Evaluate risks from competition, regulations, or other external factors.
- Shareholding Structure: Arrange a clear, transparent shareholding structure, free of conflicts of interest.
- Board of Directors: Appoint a diverse board with relevant knowledge and experience, ensuring an appropriate proportion of independent directors as per regulatory requirements.
- Internal Controls: Develop an effective internal control and risk management system.
- Management: Improve operational processes for professionalism, establish clear role separations, and implement a system of checks and balances.
A comprehensive readiness assessment will enable companies to effectively plan for listing and prepare for potential future challenges. Additionally, companies are advised to appoint an experienced financial advisor to assist with the readiness assessment and listing planning.
Financial and Documentation Preparation
Preparing financials and documentation is a critical step in the process of listing on the stock exchange. Key tasks in this phase include the following:
1. Updating Financial Statements to Meet StandardsThe company must update its financial statements to comply with the Thai Financial Reporting Standards (TFRS) as set by the Federation of Accounting Professions, which may differ from the financial reporting standards previously used by the company. This requires preparing financial statements for the past 2–3 years, as specified by the stock exchange. Additionally, these statements must be audited by an auditor approved by the Securities and Exchange Commission (SEC), who will review and provide opinions on the financial statements.
2. Planning the Use of Funds from the IPOThe company should have a clear and well-reasoned plan for utilizing the funds raised from the IPO. This includes specifying the purposes of the funds and estimating the amounts needed for each purpose, such as expanding production capacity, investing in new technology, or repaying loans. The fund utilization plan should align with the company’s long-term growth strategy and objectives.
3. Preparing Documents for Submission to the SEC and Stock ExchangeThe essential documents to be prepared include:
- Application for Securities Offering Approval (Form 35-1), which must be completed via the Digital IPO system.
- Prospectus, detailing key information about the company and the securities offering.
- Audited Financial Statements, verified by an SEC-approved auditor.
- Internal Control System Audit Report.
- Documentation of Director and Executive Qualifications.
- Company Certification acknowledging responsibilities post-listing.
- Business Plan and Financial Projections.
The company should also assemble a team with expertise in document preparation and liaise with relevant agencies, including an SEC-approved financial advisor, to ensure a smooth and efficient process for document preparation and submission.
Careful financial and documentation preparation will help the company successfully navigate the SEC and stock exchange approval process and build investor confidence for the IPO offering.
Appointment of Advisors and Application Submission
The appointment of advisors and the submission of applications are critical steps in the process of listing on the stock exchange, with details as follows:
Appointment of Financial Advisors and Auditors:
The company must appoint a financial advisor approved by the Securities and Exchange Commission (SEC) to provide guidance and support throughout the listing process. The financial advisor plays an essential role in preparing documents, verifying information, and coordinating with relevant entities. Additionally, the company must appoint an auditor approved by the SEC to review and provide opinions on the company’s financial statements.
Application Submission Process to the SEC:
- Submit an application for permission to offer securities (Form 35-1) along with supporting documents via the Digital IPO system of the Stock Exchange of Thailand.
- The SEC will review the application within 120 + 45 days from the date all documents are complete.
- Once approved by the SEC, the company must conduct the IPO within six months from the approval date.
- Submit an application for the securities to be accepted as registered securities on the stock exchange.
Pricing and Allocation of Shares:
Setting the IPO price is a crucial step that requires consideration of various factors, such as the company’s performance, book value, and market conditions. Typically, the Bookbuilding method is used, which surveys institutional investors' demand for shares.
Appointing experienced advisors and carefully following these steps will help ensure a smooth and successful listing process on the stock exchange.
Preparing to Become a Publicly Listed Company
Preparing to become a publicly listed company is a crucial process that requires careful planning to ensure a smooth and successful entry into the stock market.
Transitioning to a Public Company:- Adjusting Management Structure: Establish a transparent and auditable management structure by appointing a diverse board of directors with a proportion of independent directors that meets regulatory requirements.
- Developing Effective Internal Controls and Risk Management: Strengthen internal controls and risk management systems to build confidence among shareholders and investors.
- Personnel Preparedness: Prepare key personnel, especially senior executives and the Chief Financial Officer (CFO), to meet regulatory qualifications. For example, the CFO must complete a minimum of six hours of continuing education in accounting each year.
Preparing for Information Disclosure and Investor Relations:
- Establishing an Investor Relations Department: Set up an investor relations unit responsible for accurately and promptly communicating important company information to investors and shareholders.
- Enhancing Financial and Non-Financial Reporting Systems: Develop systems to ensure that financial and non-financial data is accurately recorded, comprehensive, and aligned with financial reporting standards.
- Preparing Annual Reports and Filing Compliance: Ready the company for the creation of annual reports and the filing of annual disclosure documents (Form 56-1) in compliance with the Securities and Exchange Commission (SEC) and stock exchange requirements.
- Clear Business Vision and Strategy: Have a well-defined vision and business strategy that is easy for investors to understand.
- Maintaining Financial Discipline and Effective Management: Sustain financial discipline and efficient management practices to generate strong returns for shareholders.
- Readiness for Market Volatility and Environmental Changes: Prepare to handle market volatility and shifts in the business environment.
- Careful Disclosure of Information: Exercise caution in disclosing information that may affect stock prices by strictly adhering to disclosure regulations.
- Managing Investor Expectations: Align investor expectations with the business reality to maintain long-term credibility.
Comprehensive preparation and adherence to good corporate governance principles will enable a company to transition into a publicly listed entity with stability and sustainability, fostering confidence among investors and all stakeholders.
The Final Step to Success
Listing on the stock exchange is a crucial milestone that opens opportunities for companies to grow and expand rapidly. However, it also comes with added challenges and responsibilities. Comprehensive preparation is key to successfully entering the capital market.Companies aiming to go public should start with an earnest self-assessment in areas such as business structure, operational performance, and internal control systems. It is essential to align financial statements with financial reporting standards and to plan the utilization of IPO funds meticulously. Additionally, appointing experienced financial advisors and auditors can help ensure a smooth process for filing applications and preparing documentation.
Adapting to the public company structure is a significant challenge. Companies must develop robust governance systems, prepare for transparent disclosure, and cultivate strong investor relations. Striking a balance between business growth and compliance with stock exchange regulations is crucial for long-term success.
Although listing involves costs and challenges, the benefits—such as access to capital, enhanced reputation and credibility, and opportunities for business expansion—are important factors that make the stock exchange a compelling goal for high-potential companies.
Ultimately, success in going public and sustaining growth as a listed company depends on careful planning, efficient management, and a commitment to creating value for shareholders and all stakeholders over the long term.
Reference:
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