Finding the right exchange to go public with might be the solution to some of your problems
According to a report published by the World Federation of Exchanges in 2016, leaders at small and medium businesses are not very well informed to make decisions in equity market financing. From the study, it was observed that leaders are not privy to information on key areas of corporate governance requirements and ongoing listing costs and these are crucial things to know before going public
As a result of this gap in knowledge, business owners revert to intermediaries to assist them in making these decisions which don’t always end well. Some banks in the US, for example, don’t have the required license to place companies publicly in Canadian exchanges so they will often direct Canadian companies to leave early through mergers and acquisition. This tactic tends to benefit the banks more, and they carry less risk
This is why companies are always being cajoled to go the M&A route instead of focusing on gradual growth in a public market. It is generally agreed that going public is a major liquidity process for existing shareholders instead of an opportunity to raise capital for growth
For sustainability of any business, there needs to be flexible across all areas of the business including financing. Going public presents an opportunity for growth and sustainability. This allows for early backers and investors and also new ones that will continue to boost the company profile. There are some factors that must be considered to be successful in this venture.
1. Understanding the terrain and listing subtleties
One of the first things to look at is corporate governance requirements. Regulations vary depending on the location of the exchange, and this can affect specific listing requirements as well. New players in the market will also affect the terrain. For example, the Nigerian Securities and Exchange Commission intends to set up new exchanges that will serve small and medium-sized businesses that have been discouraged by the stringent listing requirements prior. Countries around the world are also setting up similar exchanges.
The market is dynamic, and it is important to know exactly how an exchange is in tune with your company growth and goals.
2. Find the best exchange for you
There are exchanges such as the New York Stock Exchange that is more or less reserved for the biggest companies in the world. These companies have pretax earnings ranging around $10 million or more. But still, there are various other exchanges that are suitable for other companies without this kind of profile ad it is for you to select which is best for you at the time.
Selecting the exchange that runs with the most suitable listing standards will assure you in the regulation of your business and offer experience in the public market as you develop further. The listing requirements need not be too complicated, but they have a functional support system that will ensure market integrity.
3. Diversify your investment audience
According to Fundable, less than 1% of businesses succeed in getting investment from venture capitalists. Seeking alternatives to VC funding is another reason going public can be a great thing for companies at an earlier stage. This way, a wider and more diversified pool of investors can pitch in and feel like they are a part of something bigger than themselves and you get to have more control of your business.
Going public will raise the company’s profile in the eyes of prospective customers and employees. To maximize the benefits that come with this, you need to make sure you work with these investors early on and offer transparency at every stage. As your audience grows bigger, you should interact with them across multiple channels ranging from web demos, phone calls to even road shows.
Going public isn’t going to be easy and smooth all the way, but you stand a chance to reap all of the benefits that come with it and with the support of the pool of investors, your growth is on the right path.
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