Why go public?
For many of you, listing on a public stock exchange such as the Alternative Investment Market (AIM) or Plus Markets may seem to be an unnecessary and expensive undertaking. After all there’s a huge amount of private finance around at the moment, available from angels, venture capitalists or private equity funds. And as anyone who has followed the news over the last few years can’t have failed to notice, public companies are subject to a huge amount of scrutiny from shareholders, regulators and government. So is it worth the bother?
REASONS TO DO IT
The short answer is that there are several very good reasons why a growth hungry company should consider a market listing.
For one thing, a listing – usually achieved through an initial public offering (IPO) – will give your company a profile that it might otherwise struggle to attain. This is partly due to the cachet that the acronym PLC (Public Liability Company) still confers and partly because a place on, say AIM, will ensure that your company name appears every day in the Financial Times. An intangible benefit, perhaps, but there are plenty of CEOs who will tell you that the jump from private company to PLC has helped open doors to new markets.
If you’re planning to set out on the acquisitions trail, it can be hugely advantageous to have public tradeable shares. This will enable you to make ‘paper’ acquisitions, using shares rather than cash to pay for all or part of the target company.
Share options schemes have a lower profile than they did in the in the late nineties but they still remain an effective way to both motivate staff and attract senior executives. Publicly tradeable shares are undoubtedly more attractive than private, non tradeable equity.
CONS
A public listing is not for everyone. An IPO can cost £150,000 on PLUS Markets and up to £1m on the Alternative Investment Market. And it doesn’t end with the cost of IPOs, Market and adviser fees are ongoing and a public listing requires real commitment to investor communication if you are to avoid your company’s shares languishing in the doldrums. Even on AIM and PLUS, where regulation is deliberately light touch, you’ll have to take into account the extra compliance and governance burdens that go with the PLC territory. But your IPO will enable you to raise cash and if it helps you to achieve your sales and growth targets, it is worth considering. It is possible to raise up to £5m via an IPO on PLUS, while a typical AIM flotation nets £5-10m, and very often more.
MAJOR PLAYERS
In the UK there are three options for initial public offerings – AIM, PLUS Markets and the London Stock Exchange main list. Of these, PLUS is the cheapest. Membership of the Alternative Investment Market is more expensive, but it has the support of institutions such as pension funds and thus you will be able to raise more money. With PLUS achieving Recognised Investment Exchange (RIE) status, regulated by the Financial Services Authority, making it an official stock exchange it could prove a wise alternative as its enhanced reputation ensures greater confidence in the City. The London Stock Exchange is the most expensive option and is really for well-established large companies only. Outside the UK, the US NASDAQ provides a home for technology companies with global aspirations. For PLUS, visit www.plusmarketsgroup.com. For AIM and the LSE, go to www.londonstockexchange.com. And for NASDAQ, go to www.nasdaq.com.
