Much has been said about the journey to listing but little attention is paid to life after listing. This is very similar to all the hype built up towards a wedding when the real challenge is in building the marriage itself. Unlike the availability of marriage counselling for young couples, however, there is no listing counselling for newly listed companies. Hence, companies grope in the dark, and fumble and blunder as they try to woo and wed this “ne w animal”. But just lik e in a marriage, advice comes in all forms as many self-proclaimed “tai kum chehs” (yes, that noisy lady at traditional Chinese weddings) whisper and offer a word or two of advice, myths and hearsay.

As a business aspires towards becoming a public-listed entity, it needs to metamorphose itself into a “transparent” company, embracing proper corporate governance with its army of independent directors, a savvy chairman, and a couple of committees for good measure. Its board needs to understand “closed periods” (periods where trading in shares is forbidden), and what are and are not related-party transactions.

Post-listing, there is the monitoring of share price fl uctuations and public shareholding spread, the intensity of quarterly reporting requirements, shareholders’ meetings and compliance with the “percentage ratio” where
various courses of action are required — depending on the percentage ratio!

Hence, the tasks of seeking a listing and ensuring compliance thereafter are not easy duties, as there is still the everyday business to manage and grow. In this article, e-pay Asia Ltd shares its key experiences and idiosyncrasies of foreign listings, in the hope that Malaysian companies seeking a foreign listing can avoid the potholes it may come across.

In December 2005, e-pay undertook a reverse takeover (RTO) of SkyNetGlobal, which is traded on both the Australian Stock Exchange and the London Stock Exchange’s (LSE) Alternative Investment Market (AIM). e-pay is a provider of electronic top-up services for prepaid mobile users. It currently has operations in Malaysia, Indonesia, Thailand and Pakistan. As a relatively NKOTB (New Kid On The Block), this homegrown company with international businesses had to grope and deal in two jurisdictions, to add to its woes. e-pay hopes that Malaysian companies seeking a foreign listing can leverage on its experience.

(1) Choice of mandatory advisers— the nomad and the broker
Choice of nomad
As an AIM company, it is obligatory to appoint and retain a nominated adviser (nomad) throughout the entity’s time on the market. Nomads must be approved and authorised by the LSE. Their role, post-listing, is to mentor and referee companies to comply with listing rules.

Choice of broker
A market maker or a broker is a securities house which is responsible for facilitating and promoting trading in the company’s shares. A market maker must also be approved by the LSE. A company is required to appoint a broker to promote its shares but simultaneously is allowed to have more than one market maker. The broker acts as the point of contact between the investment community and the company.

The broker’s research division normally prepares and publishes on-going research notes to update the investment community of the company’s latest developments. It advises the company on investment conditions and the pricing of its securities whenever the company undertakes a fund-raising exercise whether via secondary fund-raising plans or a vendor sell-down exercise.

e-pay is a provider of electronic topup services for prepaid mobile users and has operations in Malaysia, Indonesia, Thailand and Pakistan

Joint or separate appointment?
In many cases, though not obligatory, the nomad and broker is the same fi rm. The argument for separate appointments is normally to avoid confl icts of interest. This is, however, not a very strong argument as, according to
an industry expert, two out of three AIM-listed companies prefer joint appointments.

The pros for joint appointments are strong. A main reason is, understandably, the enhanced coordination and communication between the two functions if it was done under one firm. Very likely, neither party will jeopardise or deny responsibility or knowledge from the other party. This plus point cannot be underestimated. Very often, the success of corporate activities is dependent on the ability of the advisers to get along.

In choosing e-pay’s nomad and broker, two factors were considered by management as key requisites — passion and fl exibility. Passion is their eagerness and belief in the business, and gauging their level of response
thereafter. e-pay’s appointed nomad took the trouble to fl y to Malaysia to meet its management, and even met the auditors, which gave the impression that they were not desktop nomads.

Flexibility is also of paramount importance. To ensure the smooth fl ow of work and information, they endorsed e-pay’s choice of reporting accountants, which was a Malaysian firm with an international affi liation, without insisting on a London-based fi rm which would have been costly and may delay the process by relearning the entire business.

However, as e-pay grew, there was a need to access a bigger pool of institutional investors’ funds in London. In most cases, these firms have a stronger institutional sales team and wider following of institutional investors. For that reason, e-pay subsequently changed to a more established nomad. Nomads are ranked by the number (not value) of IPO successes in a year and the number of clients that have appointed them as their nomad and/or broker.

Sustaining a buyers’ market
After completing the RTO exercise in January 2006, the market capitalisation of e-pay stood at approximately £16 million. The institutional shareholder base was relatively low as e-pay was a NKOTB to the investing community. Furthermore, there was a group of “inherited” shareholders (IS), who had experienced substantial capital losses, and hoped to recover their previous losses as soon as possible. This is unavoidable in most RTOs, and usually results in “fl at” share prices in the initial stage as these shares are sold as soon as there is buyer interest.

To manage the share price and gain investor confidence, e-pay offered to assist in selling the IS shares and turned to institutional investors to ignite buying awareness. This, of course, required a marketing strategy to put the company in good light and highlight its compelling propositions. A simple and straightforward presentation was articulated. After several road shows and well-timed news coverage in selected high-profi le fi nancial media, the plan worked well and there was positive response from the investing community. Consequently, the institutional shareholder base rose and the market capitalisation rose to approximately £35 million in September 2006.

(2) Choice of investor relations (IR) firm
Companies on AIM are “special” in that they come from far-fl ung parts of the world owing to AIM’s intended objectives. In July 2006, there were 1,500 listed companies, 270 of them international fi rms from 26 countries.
Australia, Canada, Ireland and the US are among the key countries. However, more and more Asian companies have listed on AIM of late. AIM raised £9.5 billion in the fi rst seven months of 2006 and market capitalisation stood at £70 billion at the end of July 2006.

Post-listing interest in the shares is important. A company must continue with efforts to be noticed by the investing community. As the Malay saying “telur sebiji riuh sekampung” goes, there is a constant need to be seen as
a strong blip on the radar screen of 1,500 other companies, and the physical distance from London does not help much. Hence, the appointment of an IR fi rm with a fl air for international businesses — yet with an Asian fl avour — has helped Malaysian companies like e-pay raise their profi le consistently among LSE investors.

Getting noticed on the radar screen
Being listed in London, the primary target audience is the London investment community. Apart from the key reasons stated above, e-pay found that an IR fi rm that is well connected with the media ensured that it is constantly on the investors’ radar for all the right reasons.

Some notable exposure came in the UK based Investors Chronicle as a NKOTB feature in May 2006 through the efforts of the IR firm, where e-pay Asia was subsequently selected as one of three “worth-considering” highgrowth prospects in Asia in September 2006.

It has also helped to organise ongoing investors’ briefi ng sessions and road shows in London, and again, an IR fi rm that is global yet local has proved its mettle in gaining acceptance and interest among the investing community in London in the long run.

(3) AIM shares — an international currency
The LSE is the second largest bourse in the world after the New York Stock Exchange. London is also a respected international financial hub and the British sterling pound is not only a major international currency but also has been steadily appreciating.

There have been questions as to why e-pay chose to be listed abroad, so far from home. In this regard, being listed in a foreign land required a lot of learning, grit and fumbling in the dark. Not only are there several jurisdictions and various laws to comply with, but one has to adjust to time differences and even culture shocks. Consequently, post-listing expenses have been quite costly.

Hence, what have the benefits been? Being listed on AIM has raised e-pay’s profile, credibility and bargaining power. Business dynamics become more globalised in fastmoving mode, and one is forced to work in
a very effi cient manner, which is essential as one competes in a global arena. AIM has also compelled e-pay NOT to rest on its laurels but to operate at full throttle, and is constantly challenging management to strategise and formulate expansion plans, improve its offering, and deliver greater value to its shareholders. All in all, the process has been challenging but satisfying.

In addition, e-pay recently acquired 100% of Mobiepay LLC, a leading specialist provider of electronic payment solutions, systems and services to the mobile telecommunications industry in Serbia. Ninety-fi ve per cent of the purchase consideration was satisfi ed by the issuance of shares, and the market once again demonstrated its effi ciency, sense of fair play
and astuteness. AIM shares have become a preferred international currency mainly owing to the stable pound and its tradability among international investors.

BY TEH SU-CHING
This IPO Insights column is brought to you by Horwath (Chartered Accountants). Su-Ching is a senior manager in the corporate finance department in Horwath. With nine years of experience helping companies get listed, Su- Ching specialises in IPO analyses.

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