The stock market; formidable, intimidating, a financial gate keeper – and yet it’s the one place you might want to list your company, especially if you’re finding tremendous success. Perhaps you started off as a young entrepreneur and grew your business to the point of going public. Like most endeavours in life, there are advantages and disadvantages, and the same can be said about listing your company on the stock market. In addition to the pros and cons, there are also specific requirements that your company would have to meet in order to be listed; and so, with all this in mind, let us now examine the benefits, the drawbacks and the requirements.
The benefits of listing
If you’ve managed to forge a successful business, and in essence, a company, then listing it will create a market valuation and enable the ability to generate capital for growth and expansion. If a company becomes listed, cash transitions into shares and the shares are then used for things like acquisitions. Shares also allows you to have a much more accurate idea of the value of your business and lets you use your cash for other endeavours. By listing your company on the stock market, your employees can also share in the potential profits, especially if you reward them with some shares. Employees who receive shares from a private company often cannot assess the real value of the shares but if a company is listed, they know exactly what they’ve got. Being listed also equips your business with the ability to rope in talented individuals with years of experience, possibly even captains of industry. The credibility that the stock market lends to your company means that high calibre board members can acknowledge your status and thus elect to work for your company. Quite often the talent you attract could be seasoned veterans who have been trading in currencies with Forex for years.
The drawbacks of listing
Compliance, scrutiny and accountability – these are some of the major factors your company will need to endure and pass once listed. A public company is essentially public property and will thus need to adhere to the rules, laws and practices that govern the market place. Compliance will need to be conducted by an external party and/or auditing firm. Once listed, your company can also face the risk of being under evaluated and this in turn can dilute your share price which can then have a negative domino effect. Suddenly you might find that your ability to acquire is completely undermined due to an inaccurate share price assessment. Then then there’s the cost of it all; management, flotation, time- consuming administration – there’ a lot of cash expending labour that goes into the listing process.
The listing requirements
While there are some variations with regards to listing requirements, there are also metric staples that one would need to consider and be aware of. Two of the most important staples are the size of the company – something determined by annual income – and the share liquidity – in other words, a specific number of shares would have to have been issued prior. To illustrate the point, the NYSE (New York Stock Exchange) asks that companies declare 1.1 million publicly-trades shares with a minimum accumulative market value of $100 million. In the case of the Nasdaq, the requirement is 1.25 million publicly traded shares and a minimum accumulative market value of $45 million. Both these financial behemoths require a minimum asking price of $4 per share. In addition to all of this, there is also a listing fee and an annual listing fee.
