Going public, a challenge for companies

Going public usually represents a turning point in the history of a company, as it brings deep changes in its economic and organizational structure. From the moment a company is listed on a stock exchange, any investor can buy and sell its shares.

What are the reasons why a company decides to be on the stock market? It is usually a way to finance growth or expansion strategies, although it is sometimes  done to offer shareholders the possibility of obtaining liquidity by selling their shares.

In either case, it is a regulated procedure that requires an exhaustive preparation by the company. Some of the aspects that the company should consider are:

  • The creation of an “equity story” that presents an attractive investment proposal.
  • The adjustment of its governing structure to market standards.
  • The search for external support in other agents, such as investment banks, auditors, etc. Their role is fundamental, as they will help the company’s stock positioning.
  • The structuring of the offering of shares to secure quantity and liquidity once they are listed.
  • The analysis of the price at which investors are willing to buy and the issuers are willing to sell.

In addition, the company must choose the procedure it will follow to go public:

  • By selling shares belonging to current shareholders (no new shares are issued). In this case, therefore, the share capital does not change: it only changes its owners.
  • By offering newly issued shares as a result of a capital increase, so that the capital share increases.
  • Through the listing system, the company does not place its shares among new investors, but enables shareholders to trade their securities in an organized market, in order to prevent some shareholders from taking over the capital of the company in a hostile way.

Publicly traded companies gain in prestige and credibility, because they commit to greater transparency in their business plans and performance by undergoing scrutiny and strict regulation on the part of the market. That is the key to make your stock attractive to investors.