Bursa Malaysia Securities Berhad has established the Leading Entrepreneur Accelerator Platform (“LEAP”) Market in 2017 to provide for a platform for SMEs to gain access to the capital markets. As of the date of this article, there are a total of seventeen (17) companies that has been listed on the LEAP Market. The question that arise is the reason why SMEs choose the LEAP Market as an avenue to raise funds instead of conventional bank borrowings.
A. What is next, Before and After listing on the LEAP Market?
At SME stage, there are limited fund raising options such as bank borrowings and equity funding from business owners. However, a company listed on the LEAP Market has an additional fund raising option which is equity funding from sophisticated investors. After successful listing on the LEAP Market, such company may be able to opt for a transfer of listing status to ACE Market subject to being able to fulfil listing requirements of the ACE Market. This enables the company to have additional fund raising options via subscription from the public and fund managers etc. Finally such company may be able to opt for a transfer of listing status to the Main Market upon fulfilling the listing requirements of the Main Market and thereafter such company will have a wider array of potential investors in particular institutional investors, locally or abroad. The best part is there is no prescribed time limit for listed SMEs on the LEAP Market to migrate to ACE Market and/or Main Market.
B. Top reasons to list on the LEAP Market
- A marketplace that provides an efficient and transparent capital formation and price discovery mechanism;
- Facilitative rules & regulations and lower cost of compliance;
- Brings together SMEs, intermediaries, sophisticated investors and Advisers onto a single platform to raise funds for SMEs; and
- An alternative and complementary platform for sophisticated investors to invest in the growth of the SMEs.
C. Key characteristic of LEAP Market
- Must be a public company incorporated in Malaysia;
- The company does not need to have a profit track record and/or operating history;
- The company must meets the suitability assessment by the Adviser;
- The company must have a clearly identifiable core business; and
- 10% public shareholding spread at the point of admission only.
What does “core business” means?
Must not be:
- a subsidiary or holding company of a listed corporation on Bursa Malaysia and the listing of such applicant will result in the existing listed corporation within the group ceasing to have a separate autonomous business of its own and not be capable of sustaining its listing in the future;
- an investment holding corporation; and
- an incubator, including a technology incubator.
D. Listing Methods
- With fund raising by way of placement or excluded issues; or
- Without fund raising by way of introduction.
E. Who can invest in the LEAP Market?
Only sophisticated investors, as defined under Schedules 6 & 7 of the Capital Markets and Services Act 2007 (“CMSA”) are allowed to invest in companies listed on the LEAP Market. The sophisticated investors are categorised as:
- Accredited investors;
- High net-worth entities; and
- High net-worth individuals.
- an individual whose total net personal assets exceeds RM3,000,000 or equivalent in foreign currencies; or
- an individual who has a gross annual income exceeding RM300,000 or equivalent in foreign currencies in the preceding twelve (12) months; or
- an individual who, jointly with his or her spouse, has a gross annual income exceeding RM400,000 or equivalent in foreign currencies in the preceding twelve (12) months; or
- a corporation with total net assets exceeding RM10,000,000 or equivalent in foreign currencies based on last audited accounts; or
- a partnership with total net assets exceeding RM10,000,000 or its equivalent in foreign currencies; or
- a company that is registered as a trust company under the Trust Companies Act 1949 which has assets exceeding RM10,000,000 under management.
F. Adviser for LEAP Market IPO
The list of Advisers is available on www.bursamalaysia.com. An Adviser’s responsibility is to assess the suitability of an applicant seeking listing on the LEAP Market, by making reasonable due diligence enquiries and considering all relevant matters. They are also responsible for the preparation of the listing documents (i.e. Information Memorandum and the Initial Listing Application). Advisers will also guide the company to comply with post-listing requirements.
G. Who are the professional team/working group for LEAP Market IPO other than the Adviser?
- Due Diligence Solicitors who are required to produce a due diligence report upon conducting a legal due diligence on the company and its subsidiaries;
- Reporting Accountants who are required to issue the accountant’s report of the group and the reporting accountant’s letter(s) in respect of the review of the group’s proforma consolidated financial information;
- Company Secretaries who are required to assist and facilitate the group in the reorganisation of the group prior to its listing;
- Independent Market Researcher who are required to produce an independent market research report in respect of the industry in which the group operates;
- Tax Agents who are required to ensure that all matters related to taxes are complied by the group.
H. Moratorium on Shares
- The entire shareholding of the promoters for a period of twelve (12) months from the date of admission;
- Subsequently, the promoters must maintain at least 45% shareholding for another thirty-six (36) months; and
- For those companies that have yet to generate an operating revenue, the moratorium of at least 45% will continue to apply until the applicant has generated one (1) full financial year of operating revenue based on the latest audited financial statements.
I. Other things to take note
- No requirement for annual report.
- Must appoint an external auditors registered with the Audit Oversight Board.
- Periodic disclosure of semi-annual unaudited and annual audited financial statements only.
J. Indicative timeline?
Upon formation of Due Diligence Working Group to the issuance of Information Memorandum, it will take approximately six (6) months depending on the extent of housekeeping required and promptness in reverting to queries from regulators.