5 Ways trading can benefit your business

chart-594212_640Choosing to go public and float your company’s shares on the stock market is a decision that shouldn’t be taken lightly. After all, the organisation’s financial dealings will essentially go from under your control to being dependent on economic conditions and market fluctuations.

However, if you have a decent amount of knowledge about public markets and confidently know your way around a trading glossary, it can be a very worthwhile decision with the potential to bring about various benefits.

  1. Access to more sources of capital

One of the main reasons for a business deciding to go public is because it opens up the possibility to raise additional finance and capital. Public companies can usually raise money for growth more easily and at better rates than private organisations of a similar size.

Its shown clearly in “Why Do Companies Go Public?” (Pagano et al. 1998), that companies that went public were able to borrow more cheaply after their Initial Public Offering (IPO). What’s more, a number a banks were also willing to lend a company increases after its flotation.

  1. Liquidity and an increased share price

Seeing as the information contained within an IPO prospectus and subsequent annual reports can reduce uncertainty around performance, companies listed on the stock exchange are typically worth more than privately held organisations.

On top of that, investors are willing to pay a premium for liquidity, or the ability to easily buy and sell shares. It is thought that listed companies will typically be valued 30 per cent higher than private organisations in the marketplace by investors.

  1. Management and employee motivation

Attracting and retaining the best talent is a challenge that businesses in every sector will experience. However, one way to ensure your staff don’t jump ship in a hurry is to offer them stock options and bonuses.

Employee ownership and equity-based awards are usually more broadly spread among the workforce in public companies than private organisations. Also, management and employees can actually witness the results of their efforts in the company’s share price, making success a joint goal.

  1. Putting together a plan for the future

Even though the flotation process requires a lot of effort and upheaval, this can actually help your business put together a comprehensive and coherent plan for future prosperity.

Many companies will improve their management and financial structure in anticipation of public ownership too. On the other side of the coin, private organisations don’t always review their internal infrastructure regularly, which can be the difference between success and failure.

  1. Enhanced brand image

Not only do public companies benefit from increased visibility through ongoing disclosures to the stock exchange or securities commission, they also attract more press coverage. This is turn can lead to an enhanced brand image among market analysts and job candidates.

In “The Ernst & Young Guide to Financing for Growth” (Garner et al. 1994), it states, “A public company that is well run and compiles a record of success can gain a first-class reputation that can prove an immeasurable benefit in many ways.”

Speak Your Mind


Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.