Issuer is a term most widely used in the world of investment and capital markets. This term denotes a private or state entity that makes an effective effect on society for the purpose of raising additional capital or funds.
In general, the term is associated with companies on the stock market. That is, the company’s actions have been sold to the public.
This definition is not wrong, but also inaccurate. Because this term is not only for companies, but individuals, joint efforts, associations and groups or organizations.
The offer given by the issuer is an offer to sell joint securities with the procedures regulated in the capital regulations and the applicable legislature.
Definition of Issuer
In the world of finance, an issuer itself means a party that conducts a Public Offering, such as an issuer offering securities to sell Securities to the public based on procedures regulated by applicable laws and regulations.
This can be interpreted as a company, both private and state-owned enterprises, seeking capital from the stock exchange by issuing securities.
There are also securities offered by issuers, namely debt acknowledgments, stocks, bonds, futures contracts on securities, proof of debt, commercial paper, units of collective investment contract participation, and every derivative of securities.
Another type of securities is sukuk, a sharia securities. It is a contract and how it is issued in accordance with sharia principles in the capital market. In general, companies in this category conduct securities offerings through the capital market for stocks, bonds and sukuk.
What’s an Effect?
When talking about Issuers, it is closely related to Securities. Securities in English are called “securities” or securities, which means securities that have value and can be traded. Securities can be categorized as debt and equity like bonds and stocks. Companies or institutions that issue securities are called issuers.
Differences between Issuers and Public Companies
Due to the sale of Securities in the Capital Market, issuers are often equated with public companies. However, the Issuer itself is not the same as a Public Company.
Based on what is written in the Law of the Republic of Indonesia No. 8 of 1995 concerning the Capital Market, the Issuer is a Party that conducts a Public Offering, which means that the party conducts an offer of Securities to sell Securities to the public based on the procedures regulated in the applicable laws and regulations.
Issuers themselves are in the form of individuals, companies, joint ventures, associations, or also in the form of organized groups that are different from public companies, which means companies whose shares are owned by at least 300 shareholders and have paid-up capital of at least IDR 3. billion, or a number of shareholders and paid-up capital that has been stipulated by Government Regulation.
The Role of Issuers in the Capital Market
The role of an issuer in a capital market, among others:
- Expansion of a business, capital that has been obtained from investors or shareholders will be used to expand business fields, market expansion or production capacity.
- Besides that, it also improves the capital structure, balances between own capital and foreign capital.
- Conduct shareholder transfers. Transfer from old shareholders to new shareholders.
Issuer’s Presence Enliven the Stock Exchange
As we have discussed together above, the issuer itself can be in the form of a private company or a state-owned company, both in an open or closed company.
However, the important thing that needs to be underlined is that not all companies have issuer status, because the status of an issuer company that is only held for companies is if they have traded their shares or bonds on the stock exchange floor.
Therefore, an issuer needs to carry out an IPO or what is called an Initial Public Offering before it can be called an issuer company. However, there are also some quite striking differences between public companies and issuer companies.
Reporting from the official website of the OJK or the Financial Services Authority, a Public Company is a company that has a Limited Liability Company basis, according to what is stated in Article 1 paragraph 1 concerning General Provisions of Law Number 40 of 2007 regarding Limited Liability Companies.
So, we can conclude that the most striking difference between an issuer company and a public company is that an issuer company is a company that has conducted an IPO, while for a public company it is a company with the status of a Limited Liability Company or PT that has already conducted an IPO.
The Company’s Purpose to Become an Issuer
What is the reason for a company to take the floor in the capital market? Companies that decide to become issuers are not without reason. They want to get benefits for the development and sustainability of the company.
Below are some of the benefits that you will get if you become an issuer, including:
1) The value of the company has increased
By becoming an issuer and being listed on the capital market, the value of a company will increase. This increase will also have a significant impact on public trust.
If the company has an ever-increasing value, the public will also trust and be interested in investing in that company. Which means that the more capital is pushed into the company, the funds will be obtained from the investors and then used to support decisions on the company’s strategic steps, such as for example business expansion.
2) The image of the company is increasing
If a company has been listed on the capital market, it can be said that the company is trusted and its image has been recognized by the public.
All information about a company can be accessed easily by the public as proof that the company can be trusted.
3) Business continuity becomes more secure
After becoming an issuer, the company will have the opportunity to get capital injections or funds from investors. These funds can be used as capital for the continuity of the business in the future.
4) Get tax incentives
In accordance with Government Regulation No. 56 of 2015 states that a company in the form of a public company can get an income tax incentive of 5 percent lower than domestic corporate income tax.
Reasons for Companies to Issue Securities
In general, the reason for a company to issue securities is to get a large amount of additional capital. There are two ways companies obtain capital, namely:
1. Debt Financing
Debt financing itself means a debt financing. Which, issuers can get foreign capital by issuing securities which are also known as bonds, which means they borrow funds from the public.
2. Equity Financing
Equity financing means funding by offering half of the company’s ownership rights to those who wish to provide capital. From this funding, a company will greatly benefit. In addition to obtaining funds, the company also does not need to return these funds and also does not need to pay debt interest.
Types of Securities Traded
There are many types of products offered, namely:
1. Shares (Right Issue, Warrant)
Shares are a sign of equity participation in the company. Simply put, shares are like evidence of ownership in a company or business entity.
So, when you own these shares, you can already be said to be the owner of the company. Therefore, shares are often referred to as securities, because they can be used as proof of legal ownership of the company.
2. Corporate Bonds
These corporate bonds are issued by a national private company such as BUMN and BUMD. Bonds are also often known as medium-long term notes whose ownership can be transferred.
The contents of this letter are an agreement from the company that will issue bonds to pay profits in the form of interest for a certain period of time and will pay off the principal debt at a predetermined time.
3. Mutual funds
Mutual funds themselves are a choice of stock instruments for investors, especially for investors who only have a little time and investors who do not have the expertise to calculate investment risk.
With this one instrument, it is hoped that investors who have the will to contribute to the Indonesian capital market.
In general, mutual funds can also be interpreted as a container that is used to collect funds from investors so that they can then be invested in securities portfolios by related investment managers.
4. Exchange-Traded Fund (ETF)
Exchange Trade Fund or ETF is a financial bond that exists in the form of a collective investment contract, in which the participation units are traded on the stock exchange floor.
Even though ETFs can be said to be almost the same as mutual funds, these products are also traded just like other common stocks on the exchange floor.
Basically, ETF itself is a combination of mutual funds in terms of management and the entire stock mechanism in terms of buying and selling.
5. Derivatives (Stock Option Contracts, Futures Contracts)
Derivatives have the form of a contract or an agreement whose profit value is directly related to the performance of other assets or commonly known as underlying assets.
The effect of this derivative is a special derivative effect, whether it is an investment or debt. The effect in question is a direct descendant of the main effect or a further derivative.
You can learn about the issuers that are printing losses from the industry and sectors most affected by COVID-19 on the IDX throughout 2020 by Buddy Setianto
Requirements to Become an Issuer
If you want to be on the floor of the exchange, there must be a number of requirements that need to be met. Among them:
- Preparing securities to be offered and traded to investors in the capital market.
- In a company that becomes an issuer, it is necessary to guarantee that the securities to be issued are appropriate and legally valid.
- Companies need to provide information that is as complete as possible and can be accounted for.
In addition to the things above, there are several documents that must be prepared and submitted as conditions, including:
- The document contains other information according to the request of the Financial Services Authority.
- Records of company financial statements that have been audited by a public accountant.
- Curriculum vitae of the board of commissioners, directors or other equivalent positions.
- Opinion in terms of applicable law.
- Agreement with Underwriters.
- A statement letter regarding the issuer’s commitment.
- Document requirements, as requirements for small-scale issuers and medium-scale issuers.
- Statement from capital market supporting professionals.
Issuer Registration and Information Disclosure
Issuers must include a registration statement in a public offering. On the other hand, public companies also need to be able to present a registration statement as a public company.
Regarding the registration statement, OJK will provide an effective statement to show proof of completeness, if all procedures and requirements have been fulfilled or a registration statement required in the established laws and regulations.
Issuer companies whose registration has become effective or public companies must be able to submit their reports regularly, as well as announce them to the public at large.
Apart from that, a report also needs to be able to announce to the public regarding material events that affect securities prices no later than the second working day after the existence of these conditions.
In accordance with RI Law no. 8 of 1995 concerning the capital market, a director, commissioner of a publicly listed company, and all parties who own issuers, at least 5% of the shares of issuers of public companies also need to report ownership, as well as any change in ownership of the company’s shares at least 10 days after the change in ownership .
Differences between Small and Medium Scale Issuers
Companies that have made public offerings are divided into two, namely small-scale and medium-scale issuers. What is a small-scale company and what is a medium-scale issuer? This definition has been written completely and clearly in the Financial Services Authority Regulation Number 53/PJOK.04/2017.
1. Small scale company
The small-scale company in question is a company in the form of a legal entity established in Indonesia with assets of no more than IDR 50 billion. Companies on this scale are also not controlled by public companies whose total assets are on the medium scale or more than IDR 250 billion.
2. Medium scale companies
This medium-scale issuer is a company that has a legal entity built in Indonesia, but has assets equivalent to or more than IDR 50 billion to IDR 250 billion. Another characteristic is quite the same as a small scale, which is not controlled directly or indirectly by a public company that has assets of more than IDR 250 billion.
In general, the task of an issuer to provide a public offering of securities is to be responsible for managing public funds in good condition. The securities offered are as described above.
Apart from those mentioned above, there are several other types of securities that the Issuer will offer to the public. Which of course depends on the development of the capital market in Indonesia. Until now, the government has also attempted to raise capital by issuing various innovative financial products.
How to Assess Issuers’ Securities Offerings
It is easy for us to understand that it is not easy to be able to assess the effect that has been given by the issuer in an initial public offering. There are a number of things that need to be considered when purchasing a securities offered by an issuer.
- Pay attention and also learn the fundamentals of the company related to how to see the prospectus in it. In the prospectus there are usually financial statements, and in it there are also risks and opportunities for the company.
- Check whether the company and other sectors are related to the issuer. Also check the opportunities from the group, or other related issuer sectors in the future. We need to analyze macroeconomics in order to be able to read the prospects for the securities offered by issuers.
- Pay attention to the securities that guarantee the company’s emissions. As a suggestion, to choose a company that works with experienced and well-known underwriter services. The way to find out is to check the company’s underwriter experience.
Example of Issuer Company
Below are some examples of issuers that have been listed on the Indonesia Stock Exchange.
- ADHI (Adhi Karya (Persero) Tbk)
- AKRA (AKR Corporindo Tbk)
- ANTM (Aneka Tambang Tbk)
- ASII (Astra International Tbk)
- BBCA (Bank Central Asia Tbk)
- BBNI (Bank Negara Indonesia (Persero) Tbk)
- BBTN (Indonesian Savings Bank (Persero) Tbk)
You can learn about the 597 Issuers listed on the Indonesia Stock Exchange September 2018 Edition Summary of Business Background and Management of Issuers by Buddy Setianto
After getting the full explanation above, it can be concluded that an issuer company is a private company or BUMN that seeks capital assistance or injection of funds on the stock exchange by issuing securities. The types of securities traded in it are quite varied, such as stocks, bonds, mutual funds, exchange traded funds, and derivatives.
If you are interested in helping or funding an issuer company, then there are a number of things you must pay attention to, such as paying attention to the fundamentals of the issuer company, paying attention to the securities that have guaranteed the company’s emissions and so on.