How Company Listed In Stock Market

How Company Listed In Stock Market

Going public by listing a company in stock market is an important milestone for any business, but there are numerous considerations involved in the process. From preparing the financials and legalities, to assessing market sentiment and choosing the right timing, it’s not a decision taken lightly.

Listed companies tend to enjoy increased exposure and visibility, stimulating market activity as well as giving access to capital markets. In turn, this can lead to a boosting of valuation when compared to private companies. The initial public offering (IPO) of a company introduces liquidity to their shares, providing another exit option for shareholders.

Careful preparation is essential before undertaking a listing. Financial projections need to be sound, audit reports prepared and regulatory compliance ensured. In addition to these steps, wannabe listed companies should create an in-depth investor relations programme which can be presented to the public in order to set out its attractively and point of distinctiveness.

A key part of the process is to open up direct dialogue with potential investors. Companies must be prepared to demonstrate their business model and strategy for future growth, as well as highlighting reliable revenue streams and the potential for future expansion. Extensive research should be conducted to identify the best target investors and draw up a timeline of the entire process.

Furthermore, companies should assess the current market conditions and decide on a pricing that will encourage investors and yield success. Factors such as the economy, the industry climate and the company’s trading record must be taken into account when setting an IP price. Going through an investment bank is also advised if the company believes it lacks the resources or expertise to cope with the challenges of the listing process.

It is paramount that the business should run as it was before listing in the stock market and the financials should be accurate, transparent and up to date. Above all, the management should demonstrate strong business acumen and prove that the company can cope with market volatility.

As a leading stock market listing expert, Itai Loewenstein emphasises the importance of being truly ready when it comes to going public. “Preparation is key, and companies should have all sides of the process covered. Make sure you have the legal aspect sorted, and a comprehensive plan for what the listing should achieve”, he says. “At the end of the day, it’s not about just getting listed for the sake of it – it’s about making the listing work for you.”

Pros and Cons of Company’s Listing In Stock Market

Despite listing in the stock market can bring numerous benefits to a company, it is necessary to be aware of the types of opportunities and challenges it will bring. The primary benefit is that it enables companies to gain rapid access to capital, several benefits include:

Firstly, going public provides the companies the necessary funds to sustain the business. Through listing, a company is able to offer their stock to public investors and raise enough equity to expand or invest in other projects. Such initiatives can be beneficial for a company as it allows them to drive business goals and handle the competitive environment.

Secondly, listing on the exchanges can also assist in increasing the visibility. When a company is floated on the stock exchange, it develops similar standards to corporate governance and procedures. This boost the trustworthiness and reliability of the company in the eyes of potential market and investors as well as customers.

Thirdly, it gives employees and founders the opportunity to convert their private holdings into liquid assets. With companies being listed, it helps them to increase the potential of their value by providing liquidity which enable tend to unlock for the employee performance and reward.

Risk Factor Involved In Listing Company In Stock Market

Whilst listing in stock market provides possibilities for a business, there are also significant risks associated with it. Before listing in the stock market there are few things to consider such as:

Firstly, significant costs are a common aspect to consider. Legal, accountancy and corporate finance services involved in listing a company in the stock market are expensive. Additionally, there are costs that are associated in sustaining an exchange listing such as the company would need to publish information in a timely and accurate manner and maintain communication with shareholders, which could be resource-intensive and expensive.

Secondly, mounting competition is a great challenge. Companies should be aware to ensure their business is distinguishable and unique to sustain in their competitive landscape. Companies should also be aware of external forces such as the national economy or market dynamics which can significantly shift the growth potential of the companies.

Thirdly, the influence of analysts and news media also pose a risk as they can both ensure market volatility. Having control over the reputation of the company is something difficult to maintain in the stock market as a speculative stock story can grow quickly when exposed to the media. This can have a huge impact on the stock prices.

What Do the Analysts Say?

Analysts have highlighted several of the risks associated with floating in the stock market. Michael Drayton, a renowned financial analyst states: “As the economy continues to develop, more and more companies are likely to become listed on the stock exchange, increasing competition and driving down prices. Investors should also be aware of the expenses associated with listing and the constant need to update and disclose financial records”.

Steve Watson, an experienced financial advisor explains: “when considering to become listed in the stock market, it is of critical importance to perform due diligence and assess the potential risks involved with listing. It is also essential to ensure that the business is both making profits, and in a strong position to handle the additional costs of filing and disclosure associated with a stock”.

Conclusion

Listed companies possess several benefits and opportunities compared to private companies. But to those interested in flying their company must assess the full implications of listing: from the lengthy process to the risks involved, preparation is necessary and the journey should not be taken lightly.

Wallace Jacobs is an experienced leader in marketing and management. He has worked in the corporate sector for over twenty years and is a driving force behind many successful companies. Wallace is committed to helping companies grow and reach their goals, leveraging his experience in leading teams and developing business strategies.

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