Will Floating on the Stock Exchange Tie Your Firm Down?
26 May 2010
A lot of businesses decide to venture into other areas of potential earnings once they're established and doing well. Many men and women around the globe specialize in taking things to the next level in terms of stock market options. Many more, however, are run-of-the-mill businesspeople and are not fully aware of the stock exchange's implications.If you're planning on floating your business on the stock exchange, what exactly are you in store for?
In simple language, floating on the stock market simply means you have sold a percentage of your business as shares. The London Stock Exchange is usually dominated by larger firms choosing to go this route, while AIM (Alternative Investment Market) and PLUS are around for smaller companies wishing to go the same route.
There are really only a few viable reasons for any company to consider floating on the stock exchange. First and foremost, this will help to raise capital. By selling shares of a successful business, it becomes a good way to immediately see an influx of cash. Having shares of your company also becomes an incentive to employees a motivational tool, more or less.
Of course, floating on the stock exchange is also a great way to boost your company's profile. Any business found in the stock market will have much greater credibility than those not willing to risk it.
However, this move isn't right for every company. You need to make sure your business is heading in the right direction before deciding to float on the stock exchange. You need the size and strength to compete, not to mention a firm structure.
The first question that needs to be addressed is whether or not your company is ready to be publically traded. Are members of your team motivated and ready to handle the strategic planning involved? Is your company on a clear and decided path pushing toward the future?
How might floating on the stock exchange tie your business down?
Any publically traded firm has to abide certain rules and regulations. This might mean changing the way you're doing business. It will mean, regardless, that you must run an all-around tighter ship. Things will no longer be business as usual. These market standards could change at any time and send you into a tailspin while trying to adhere to the rules.
You are also locked in when it comes to business direction. People purchase shares of your company because they like the current direction and the profitability of the business. If you decide to change things, even if you think it's for the better, you can expect to see your company's stock drop. The market is extremely fickle, and that's why larger companies are the primary wheelers and dealers.
In terms of growth, floating won't tie you down. You are still free to expand your company, seek shareholders' input and proceed as you see fit. The biggest worry is that share prices collapse and your company's name becomes mud. Floating is something that only a fine tuned business should consider.
