The Taiwan Monthly

Jun. 2018

Listed Companies and Initial Public Offerings

Listing criteria broadened to lower threshold for companies without profit

Technical innovation and globalization in recent years have changed the face of industrial development. Regarding major stock exchanges around the world, many have established listing criteria for companies that have reached a certain level of market capitalization but still operate at a loss. Such criteria are commonplace in capital markets in other countries and intended to provide companies without profit with means to raise capital to support growth.

 

The Taiwan Stock Exchange (TWSE), prompted by economic development and industry trends, is taking into consideration the situation that some startups in Taiwan are unable to generate stable profits in the early stage, but their business models may have great potential and their businesses have grown to a certain size. Such companies are in great need of capital to grow, but lack means to secure listing on an exchange. To encourage and support innovative companies to raise capital before achieving a positive profit, TWSE has reviewed the quantitative listing criteria in Taiwan with reference to listing criteria in other countries, and amended the rules governing review of securities listings to include permission for large companies without profit but meeting certain criteria to apply for listing. As a capital raising and investment platform, TWSE makes it part of its mission to help startups become listed companies and raise capital to facilitate growth.

 

Large companies that are exempted from the profitability requirement under the new amendment are required to maintain a paid-in capital of NT$600 million. In addition, such companies are divided into Category 1, which contains those with a market value of NT$5 billion or more and Category 2, which contains those with a market value of NT$6 billion or more. Companies in both categories are required to meet certain criteria regarding operating income, cash flow, and net value. Category 2 companies with a market value of NT$6 billion or more are exempted from the cash flow requirements, but still have to show a certain level of operating income and net value. Furthermore, TWSE requires such companies, when applying for listing, to include phrases indicating exemption from profitability requirements on the cover of the prospectus to inform investors of the fact.

 

The listing criteria for the two new categories of large companies without profit are described below.

  1. Market capitalization of NT$5 billion or more: The operating income is greater than NT$5 billion and higher than the previous year. The cash flow from operating activities in the latest year is positive, and the net worth is two thirds or more of the paid-in capital.
  2. Market capitalization of NT$6 billion or more: The operating income is greater than NT$3 billion and higher than the previous year. The cash flow from operating activities in the latest year is positive, and the net worth is two thirds or more of the paid-in capital.

 

For further inquiries, please contact Ms. Feng at 0817@twse.com.tw.