There are multiple reasons why you might want to take your company public.
There are 5.5 million private businesses in the UK. If you’re one of these but want to reap the benefits of a publicly traded firm, there are a variety of ways to make it happen.
But first things first, why choose to go public?
The main advantage of going public is the funding that it can raise to help propel your company forward. Whether you’re interested in making significant growth, want to invest in research and development or branch out into a wider field, the money that can be made from floating your stock can be invaluable.
It can also help raise the profile of your company and enhance its reputation in the industry, whether with potential customers or suppliers.
The different ways to list your company
If you’re taking your company public, there are a few ways to make it happen:
Initial Public Offering (IPO)
This is the most popular option for companies who are new to the stock market and it involves offering shares for the very first time, subject to meeting specific exchange requirements. Underwriters give proposals and communicate their intentions including the amount of shares available and pricing.
While this is typically a successful way to raise funds, the process itself can be costly and requires vast amounts of time and commitment.
One way to reduce the costs associated with underwriters and to save time is through direct listing. This involves raising funds privately with the opportunity for these investors to sell their existing shares on the market in the future. However, without a lock-in period like there is with an IPO, shareholders can sell their stock whenever they wish.
Although this is a cheaper and much simpler way to list stock, it does incur an increased risk of volatility.
This involves a private company acquiring a current publicly traded company to assist with listing their own company. The public company is referred to as a ‘shell’ company as it usually has little in the way of operations and is an ideal opportunity for a smaller company to reorganise its assets.
Initially, the smaller business company purchases over 50% of the larger company’s shares before swapping with their own and creating a subsidiary. However, there is no capital raised with these transactions and there is a risk of unethical mergers.
Whatever the size of your company, if you’re looking to list your company on the stock market, it’s vital to weigh up the pros and cons of each option to ensure you choose the right process for you and your business.