How are Shares Priced?

The issue price is dependent on the earnings of the company. The lead manager will usually look at the historical earnings of the company as an important indicator for pricing. As such, depending on the industry, the Net Tangible Assets ("NTA") of the company may not be relevant in the pricing of shares, as it may not be a good indication of the company's future earnings.

The lead manager will also need to understand the future earnings of the company to assess the sustainability of the historical earnings. This will affect the pricing of the shares as well. Therefore, it is important to prepare a two-year business plan for review by the lead manager.

For companies that have no historical track record of positive earnings, the issue price may be based on future earnings. In such cases, an expert opinion will be reqired of the company.

The par value of the company's shares will generally determine the number of pre-IPO shares and thus affect the eventual number of shares in issue. The par value of shares has no impact on the valuation of the company's shares.

* Methods of Offer

A company may distribute the offered shares either by way of public offer, placement or book building, or a combination of these methods, subject to compliance with the prevailing listing rules.

Public Subscription Tranche
These are shares offered to the public for subscription. In the case of an excess in public subscription, the allotment of shares is subject to balloting.

Placement Tranche
These are shares to be distributed at the discretion of the lead manager, underwriter and/or lead broker. Usually, these shares are placed to fund managers, institutional investors, and/or individuals who have expressed an itnerest in subscribing to the offered shares.

Reserved Tranche
These are shares reserved for employees, directors, customers, suppliers, business associates and others who have contributed to the success of the company. Reserved shares form part of the Placement shares.

Shareholding spread
After deciding on the method of offer, the company has to decide on the amount of post-invitation share capital that is to be in public hands. The following table lists the minimum public float requirement based on the company's market capitalisation.