Stock Market Flotation

As the Royal Mail and Twitter prepare to list on the stock market, the question as to whether your business is suitable for public listing should not be overlooked by any business owner. If a business owner is interested in taking his business public he needs to consider the advantages and disadvantages for floating on the stock market:

Advantages

  • Places a value on your business.
  • Helps you raise capital, so you can recoup some of your investment or develop the business further.
  • Enhances your public presence, adding value to your brand and reputation.
  • Makes it easier for other venture capitalists to invest and realise the returns on its investments.
  • Increases the types of incentives you can give to employees.

Disadvantages

  • Your business may be affected by the fluctuations in the market and factors not in your control.
  • There is a need for transparency and your business will need to comply with all the regulatory and corporate governance standards.
  • As shareholders have invested in the business, you will now have a responsibility to consider their interests.Â
  • Depending on how much of the company is floated on the stock market there may be a loss of control.
  • Increased demand on the management team, as they will need to deal with investors, assist with the floatation as well as manage public relations.Â
  • The cost of listing your company can be great and there is likely to be ongoing costs to ensure all regulatory requirements are met, investors expectations are managed and the likelihood of an increase in professional fees.Â

Other factors to consider prior to going public include:

  • Ensuring your company is in a strong financial position.
  • You have a track record of delivering growth and profits.
  • The sector in which your business operates is attractive to investors.
  • You can set out a strong business plan, deliver a strategy of growth and provide investors with a strong return on their investment.
  • Is your management team capable of handling the floatation and running a public company?
  • Which method of floatation and market is most suited to your business?
  • Which stock market do you intend to list your company on?
  • Are the market conditions suited to maximise the amount of capital you can raise?

Any business planning on listing on a stock market need to consider the above factors and appoint suitable advisers to ensure any listing completes with a minimal amount of problems.

If you’re interested in listing your company or in buying or selling a business and would like to find out more, please contact Izaz Ali on izaz.ali@lawdit.co.uk.

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