IPO Promoter & Major Shareholders Analysis Guide Malaysia

Introduction: Who Is Behind the IPO?

In the world of investing, a company is not merely assets such as factory buildings or financial statements alone. It is driven by people. This is why it is crucial for us to understand the topic of IPO Promoters and Major Shareholders.

During an IPO (Initial Public Offering) season hitting the stock market, many new investors or "newbies" are often excited by the potential for quick profits.

Newbies who are still new to IPO stocks can read further here:

[What Is an IPO or Initial Public Offering?]

"First day of listing already can make money, awesome lah," said Tauhed, a newbie who just opened his CDS account a week ago.

Terms like "oversubscribed" and "target price" often become the talk of the town.

However, there is one critical aspect that is frequently overlooked by retail investors but becomes the primary focus of institutional investors: Who is the management behind this company?

This article will delve deeply into the definitions, roles, analysis techniques, and how these individuals influence stock price fluctuations before and after listing.

Why Promoters and Major Shareholders Are Crucial

Imagine you want to board a sailing vessel for a long journey across the vast ocean. Would you only assess how beautiful the ship's design is? Or would you check who the captain is and who owns the ship?

In the context of stock market metaphors:

The Ship is the Company.
The Captain is the Management/Promoter.
The Ship Owner is the Major Shareholder.

If the ship's captain has a poor record — for example, having previously struck a reef — or the ship owner is notorious for not maintaining the engine, even the most beautiful ship is at risk of sinking.

The same applies to IPOs. A company's future performance is highly dependent on the integrity, vision, and capability of those steering the company. For investors in Malaysia, understanding their background is one of the key factors you need to know to avoid losing your investment money.

We certainly do not want "incompetent management" steering the company's direction!

Detailed Definitions: Who Are They Really?

Many people confuse Directors, Promoters, and Major Shareholders. Although the same individual can hold all three roles, their definitions from a capital market technical standpoint are different.

What Is an IPO Promoter?

A Promoter is an individual or entity that "gives birth" to the company. They are the ones with the original idea, who take the initiative to establish the business, formulate the initial strategy, and bring the company towards an initial public offering (IPO).

Key characteristics of a Promoter:

Has direct or indirect control over the company.
Involved in the preparation of the prospectus and expansion plans.
Usually holds executive positions (such as CEO or Managing Director) and holds a significant stake in the company.

Simply put, a promoter is the "towkay" or founder who is the lifeblood of the business.

What Are Major Shareholders?

In Malaysia, the term commonly used in prospectuses is Substantial Shareholder. The official definition of a major shareholder is an individual or corporate body that holds 5% or more of the total shares of a company.

Their roles in the ownership structure:

Non-Controlling Shareholder: Holds a large percentage (for example, 10-20%) but not enough to control decisions entirely without the support of other parties.

Controlling Shareholder: If they hold more than 50%, they have absolute power in determining the company's direction through voting.

Difference Between Promoter vs Ordinary Shareholder

The most notable difference is in terms of responsibility and commitment.

Ordinary Shareholder (Retail Investor): Only contributes capital and expects returns (dividends or price appreciation). Can sell shares at any time.
Promoter: Bound by strict regulations, their vision determines the life and death of the company, and they are often subject to share sale restrictions (moratorium) for a certain period after the IPO.

Why Regulators Emphasise This Information Disclosure

Have you ever flipped through an IPO prospectus (the thick document issued before listing)? You will find dozens of pages dedicated to describing the promoter's biography and the list of shareholders.

Read further about the Prospectus:

[Introduction to IPO Prospectus: A Complete Guide for New Investors]

Regulators such as Bursa Malaysia and the Securities Commission Malaysia (SC) strongly emphasise this transparency to protect investors. The main reasons are:

Avoiding Conflict of Interest: Investors need to know if the promoter has other businesses that may compete with the company being listed.
Management Integrity: Regulators want to ensure that those leading the company have no record of financial crimes, bankruptcy, or history of corporate fraud.
Business Continuity: This disclosure proves that the company is managed by qualified individuals, not merely an "ali baba company" with no real expertise.

Techniques for Analysing IPO Promoters for Beginners

How can investors assess the quality of a promoter? You do not need to become a private investigator; simply reviewing the information in the prospectus and conducting general searches is sufficient. We also do not truly know who these people are.

Check Background and Track Record

Look at the "Board of Directors & Key Senior Management" section in the prospectus.

Do they have 10-20 years of experience in the same industry?
Have they previously held important positions in multinational companies or other listed companies?
Concept: Long experience indicates they understand the ins and outs of the industry's economic cycles ("weathered the storm").

Potential Risks and Red Flags

Sometimes, what is not written is more important. Use the Google search engine to look up the promoter's name.

Has their name ever been associated with corporate scandals?
Have they previously led a company that was subsequently delisted due to financial problems?
If the promoter has a history of "pump and dump" (inflating the stock price then selling it), this is a major red flag.

Read further about Risk Management: [Introduction to Risk Management in Stocks]

Analysing Ownership Structure

Observe the company's structure chart. Is it overly complex with many layers of investment holding companies? An overly complicated structure is sometimes created to conceal who the true owner (ultimate beneficial owner) is, which can be a sign of lack of transparency.

Lock-Up Period (Moratorium Period)

This is the most critical indicator. Bursa Malaysia stipulates that key promoters cannot sell their shares for a certain period (usually 6 months) after listing.

Analysis: If a promoter voluntarily extends their moratorium period longer than the minimum requirement (for example, promising not to sell for 1 year), this demonstrates their high confidence in the company's future.

Techniques for Analysing Major Shareholders

Besides the promoter, who else holds the company's shares? Your "partners" in this investment also play an important role.

Reading the Shareholding Structure

In the prospectus, look for the table showing shareholding before and after the IPO.

Institutional Investors: Are there major funds such as EPF (KWSP), PNB, or private unit trust funds entering as cornerstone investors? The presence of "smart money" or institutional investors usually lends credibility that the company has undergone a rigorous due diligence process.

Understanding Concentration of Ownership Risk

If after the IPO, the promoter and major shareholders still hold 75% of shares (the maximum allowed to remain compliant with Shariah/Listing Requirements), this means:

Advantage: They are highly committed.
Disadvantage: Share liquidity may be low in the open market because only 25% of shares are circulating for the public (public spread). Illiquid shares are difficult to buy or sell in large quantities.

Influence on Company Direction

Major shareholders have voting rights. If a single shareholder controls more than 50%, retail investor votes at the Annual General Meeting (AGM) may not have a significant impact. However, investors should ensure that this major shareholder has a vision aligned with company growth, not merely extracting dividends.

Who holds the shares has a direct effect on market psychology and stock prices at different phases.

Phase 1: Before Listing (During the Application Period)

The promoter's reputation is the primary "magnet".

If the promoter is a respected corporate figure who has previously brought another company to a global level, the demand for the IPO will surge.
This causes the subscription rate to become very high (oversubscribed), which is often translated into a high opening price later.

Phase 2: On Listing Day

On the first day, sentiment plays a role.

If major shareholders consist of strong institutions, retail investors feel more confident ("confidence booster"). This can contribute to a sudden price increase or "Day-One Pop".
Conversely, if the market doubts the promoter's credibility (perhaps due to negative news circulating before listing), selling pressure may occur as soon as the exchange bell rings.

Phase 3: After 6 Months to 1 Year (Post-Listing)

This is the critical phase where the moratorium (lock-up) period expires.

Negative Scenario: If the promoter or major shareholder begins selling their shares aggressively as soon as the lock-up period ends, the market will interpret it as "Run! The ship is sinking!" or that the owners themselves do not believe in the company. This will cause the share price to drop.
Positive Scenario: If they maintain their holdings even though they are free to sell, it signals long-term "Unlock Value". External investors will be more confident in holding the stock.

General Case Studies

To understand more clearly, let us look at two scenarios that frequently occur in the local and global markets.

Scenario A: The Experienced Veteran A construction company wants to be listed. Its promoter is a veteran engineer who previously led a major corporation for 30 years before retiring and starting his own company. Although the company is only 5 years old, his personal reputation causes major funds to compete to become key investors. As a result, the IPO price opens at a high premium and remains stable because investors trust the "hands" managing the company.

Scenario B: The Exit Strategy A technology company is listed with a very high valuation. However, analysis reveals that the company's promoters are a group of Venture Capital investors who indeed intend to liquidate their holdings (cash out). As soon as the moratorium period expires, aggressive selling of shares by these major shareholders occurs. The share price plummets below the IPO price, leaving retail investors trapped at the peak.

Lesson: Analyse the promoter's intent — do they want to raise capital to grow the business, or are they merely seeking an exit to take profits?

How Beginners Can Use This Information for Investment Decisions

Do not rely solely on tips from social media. Follow these simple steps before pressing the "Apply" button for an IPO:

Open the Prospectus: Go to the Bursa Malaysia website and download the prospectus.
Find the "Promoters & Substantial Shareholders" Section: Read their brief profiles. Are they "industry people"?
Conduct a Background Check: Google their names along with keywords such as "scandal", "lawsuit", or "fraud".
Check the Use of IPO Funds: Ensure the majority of funds are used for business expansion, not merely paying off debts or paying back the promoter.
Observe the Institutions: Are there unit trust funds you recognise also investing? If so, that is a positive sign.

Read Further: IPO Trading Strategy: Secrets to Generating Profits from Newly Listed Stocks

The Human Factor: Greatest Asset or Greatest Liability

Investing in an IPO is not merely a game of luck or a lottery. It is the process of purchasing partial ownership in a real business. In business, the human factor — namely Promoters and Major Shareholders — is the greatest asset or the greatest liability.

As a wise investor, our duty is to ensure that our money is entrusted to management that is trustworthy, capable, and has a long-term vision.

Share prices may rise and fall according to market emotions, but a company guided by a competent promoter has a brighter chance of recovering and thriving. So, before you are mesmerised by a company's logo or market "hype", get to know who the "captain" of the ship is first.

Be an informed investor, not merely a trend follower.

Frequently Asked Questions (FAQ)

1. Can promoters sell all their shares after the IPO?

Technically yes, after the moratorium period ends, but it rarely happens drastically as it would collapse the share price and their own reputation. Usually, selling is done in stages.

2. Where can I find the list of major shareholders?

This information is mandatory in the IPO Prospectus (before listing) and in the company's Annual Report (after listing).

3. Do all IPOs guarantee profits?

No. IPO performance depends on many factors including global market conditions, company fundamentals, and management quality. Promoter analysis is one way to reduce risk, not to guarantee profits.

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