Written by Richard Wee and Wendy Ho.

Feel free to contact the authors for further clarification on IPO vide justright@richardweechambers.com.

On the 26th of October 2020, MR D.I.Y. Group (M) Berhad, Malaysia’s largest home improvement retailer successfully made its debut on the Main Market of Bursa Malaysia Securities Berhad (“BMSB”). Mr DIY made history as the largest Malaysian IPO of 2020 at RM1.60 per share, amidst battling the ongoing Covid-19 pandemic. “Public Listing” and “IPO” – terms which may somewhat sound familiar to many, yet foreign to some. To the industry players in the corporate world, public listing of a company is seen as a means of raising capital. This article aims to provide a brief overview of IPO in Malaysia. 

Initial Public Offering (“IPO”) is a process whereby a private company offers shares to the public in a new stock issuance. To put it simply, in most instances, IPO is a private company’s first attempt in “going public”, with its name being listed on the stock exchange. Having grown throughout the years with the support of early investors, there comes a time where a private company would consider going public to raise capital in hopes to soar the company’s business to greater heights, with the belief that the business can be expanded so as to meet its long-term business goals and aspirations for success. Besides, many believe that public listing would enable current investors to realise their investments, provide liquidity to company shares, motivate and retain current employees, as well as to enhance a company’s market presence to new suppliers and customers. 

The Malaysian stock exchange is operated by BMSB. BMSB is in turn owned by Bursa Malaysia Berhad, which falls under the purview of the Securities Commission (“SC”) and the Ministry of Finance. The SC plays an important role as it ensures compliance of the capital market with relevant laws, and in particular the Capital Markets and Services Act 2007 (“CMSA”). It is pertinent to note that the Malaysian stock exchange comprises three (3) markets in order to cater to different sizes of companies, namely the Main Market, the ACE Market, and the LEAP Market. 

The integration of the Main Board and Second Board into a single board of established corporations has resulted in the emergence of the Main Market on 3 August 2009. Prominent industries in Malaysia like oil & gas, airlines and manufacturing are commonly found on the Main Market. 

Companies with a desire to be listed on the Main Market have to meet either the Profit Test, or the Market Capitalisation Test. Under the Profit Test, a company would have to demonstrate uninterrupted profit of three (3) to five (5) full financial years, with aggregate after-tax profit of at least RM20 million, an after-tax profit of at least RM6 million for the most recent financial year, and have been operating in the same core business over at least the profit track record years prior to submission for entry into the Main Market. On the other hand, a total market capitalisation of at least RM500 million upon listing and an incorporated and generated operating revenue for at least one full financial year prior to submission for entry into the Main Market is required in order to fulfill the Market Capitalisation Test. In short, the Main Market is catered for established companies that have met the standards in terms of quality, size and operations.

Falling within the purview of the SC and Bursa Malaysia, the SC reviews proposals for listing on the Main Market pursuant to section 212 of the CMSA, in ensuring compliance with the Equity Guidelines. 


Upon admission to the Main Market of Bursa Malaysia, there must be a public spread of 25% of the total listed shares of the company and a minimum of 1,000 public shareholders holding not less than 100 shares each. Companies with Malaysian-based operations are required to allocate 50% of the public spread requirement to Bumiputera investors at the point of listing. There is a six (6) months moratorium period imposed for listing pursuant to the Profit Test and the Market Capitalisation Test, in that promoters are not allowed to sell, transfer or assign their entire shareholdings in the company as at the date of listing, for six months from the date of admission to Bursa Malaysia. ‘Promoters’ are essentially persons who own more than 33% of the voting shares or who are in position to control the composition of a majority of the board. 

The listing process for the Main Market usually takes up to six (6) to nine (9) months, depending on the structure and complexity of the listing scheme. However, the validity of the approval from the SC is for a period of six months from the date of approval.

Access, Certainty, Efficiency. Derived alongside the amalgamation of the Main and Second Board into the Main Market of Bursa Malaysia in 2009, the ACE Market is targeted towards startups and new companies which seek to push for more capital by listing their companies publicly and aims to invigorate the growth of innovative products and companies. The ACE Market is essentially a platform where companies that are more industry-specific aiming are usually found. 

As the name suggests, the ACE Market allows for public listing of companies in a more efficient manner by having less stringent listing requirements, without the need for companies to provide historical profit track records as is required in the Main Market. Conversely, applicants who aspire to make their way into the ACE Market need only demonstrate outstanding growth potential. In practice, however, a profit of RM3 million to RM4 million is required for entry into the ACE Market. Besides, a working capital for at least 12 months from the date of a company’s prospectus for an initial public offering is also required. All listing requirements within the ACE Market is governed under the ACE Listing Requirement. 

Being a sponsor-driven platform, there exists reliance by Bursa Malaysia upon the sponsors in ascertaining the suitability of the listing applicant. The factors that will be taken into consideration by the sponsors would include, inter alia, the company’s growth prospects, capability of the directors and management, commitment to compliance with relevant rules and regulations, responsible directors, risk management, and good corporate governance. Mirroring entry into the Main Market, companies are required to make relevant and adequate disclosures in their prospectus, which is a document to articulate the company’s prospects and investment proposition. 

Following admission of the company on Bursa Malaysia, 25% of the paid-up capital must be in public hands. The company must have at least 25% of the total number of shares for which listing is sought in the hands of a minimum number of 200 public shareholders holding not less than 100 shares each. Subsequent to the IPO, there will be a moratorium imposed on the sale, transfer or assignment of shares held by promoters of an applicant for a period of 6 months from the date of admission to Bursa Malaysia. 

Upon expiry of the 6 months period, the company shall ensure that the promoters’ aggregate shareholdings amounting to at least 45% of the nominal issued and paid-up ordinary share capital of the companies remain under moratorium for another period of 6 months. Subsequently, the promoters may sell, transfer or assign up to a maximum of 1/3rd per annum (on a straight-line basis) of the shares held under moratorium subject to certain conditions.

Also known as the Leading Entrepreneur Accelerator Platform Market, the LEAP Market was introduced by Bursa Malaysia in mid 2017 as an opportunity for Small and Medium Enterprises (“SMEs”) to raise capital and enhance their visibility in the capital market, albeit not being able to attain criteria for listing on the Main Market and the ACE Market. In short, the LEAP Market is catered for all companies which are public companies registered in Malaysia. SMEs which are seeking to list their companies on the LEAP Market are essentially raising funds from sophisticated investors, which are entities with net assets exceeding RM10 million or individuals with net personal assets exceeding RM3 million or whose gross annual income exceeds RM300,000. 

The LEAP Market is pivoted upon three guiding principles, namely cost efficiency, appropriate regulations for SMEs and a qualified market for sophisticated investors. As opposed to advisers in the Main Market and the ACE Market which are restricted to only investment banks and certain securities firms, the advisers in the LEAP Market extends to other firms which hold Corporate Finance Adviser licenses regulated by the SC, such as boutique advisory firms. Resembling the ACE Market in being a sponsor-driven market, some believe that the LEAP Market is slightly distinguishable in that it is sponsor-driven on a “light-touch” basis. 

In order for SMEs to list on the LEAP Market, they must first be a public company incorporated in Malaysia, have a clearly identifiable core business and attain the suitability assessment by an approved adviser. The approval process by Bursa Malaysia usually takes about three to four weeks. Upon admission to the LEAP Market, there must be a minimum shareholding spread of 10% of the company’s ordinary shares. There will also be a moratorium on the promoters’ shares 12 months from the date of admission into the LEAP Market. Upon cessation of the 12 month moratorium, the promoters must retain at least 45% of the entire issued share capital of the company for another 36 months.

In short, the listing process is divided into seven (7) stages, namely the pre-submission, submission, regulatory approval, post-approval, IPO launch, listing and post-listing. At the pre-submission stage, advisers are appointed and due diligence is conducted. The prospectus and regulatory submissions are also prepared. For the purposes of entry into the LEAP Market, an Information Memorandum (“IM”) is required in lieu of the prospectus. It bears mentioning that the listing application alongside the prospectus should be submitted for approval no later than six (6) months from the financial year end of the company. Regulatory approval comes into play when the prospectus is subject to public exposure and queries from the approving authority. Once the prospectus is being approved and updated, it will be registered with the SC and lodged with the Companies Commission of Malaysia (“SSM”). At the IPO launch, the prospectus will be launched to the public and there will be roadshows to market the company’s shares. Last but not least, listing onto the Bursa exchange will take place. 

To conclude, IPO is seen as a platform to assist companies to “ace the market” by “leaping itself” into the Malaysian stock exchange. With the three markets catering to businesses of various sizes, some may say that the IPO is pretty much similar to the boxing scene where there are heavy weight, middleweight and light weight categories. Throughout the assessment of an IPO application, there are vigorous internal challenge processes in place to ensure thoroughness, consistency, transparency and accountability, to which the companies eyeing an IPO shall ensure their best to meet them.


Uploaded on 17 November 2020

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