As recently seen in the latest edition of the North East Times, Rachel Hayes (Corporate Broking Director at Singer Capital Markets) discussed the intricacies of what it means to go public, and why companies choose to IPO. Rachel has over 20 years’ experience in the industry, and has successfully advised many companies on IPOs and secondary fundraisings during her career. Here, we summarise some of the key benefits of an IPO, and what it means to go public.
One of the key advantages is management control and freedom to execute on a strategy. While investors always have the option of voting with their feet, the public markets are largely comprised of a passive investor base who are use to dealing with brokers/advisers.
2. Acquisition currency
A stock market listing also provides a currency for acquisitions and a tangible, transparent value to attract, maintain and incentivise management and staff.
3. Company profile
An IPO often raises a company’s profile and enhances its credibility with suppliers, creditors and customers.
4. Selldown option
Raising growth capital should be the primary motivation for an IPO, but it can also provide an opportunity for at least a partial selldown by founders/early stage investors.
When looking at what to expect as a listed company, Rachel advises: “Of course, an IPO should not be viewed as an end in itself, particularly for management and ongoing shareholders. Being a publicly listed company means exactly that – public! Interim and annual reports need to be published and investors kept regularly updated. This brings a level of scrutiny, but also provides the means for management teams to communicate with all stakeholders, including employees and customers in an open and transparent manner. Ultimately, successful delivery should create value for all shareholders.”
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