You can grow your business, raise its profile and access capital by floating it on a stock market catering for small and medium-sized firms, writes Fiona Le Poidevin CDir, CEO of The International Stock Exchange Group
The costs and complexities associated with stock market flotations mean that they’re widely considered the preserve of multinational companies. The International Stock Exchange provides a more appropriate offering for a wider range of ventures, including SMEs – and their owners should consider how accessing capital markets at an earlier stage could boost their businesses.
Flotation offers a number of potential benefits for a company. These include one or more of the following:
* Access to a new pool of capital.
* Enhanced profile and prestige.
* Demonstrable adherence to well- recognised standards of corporate governance and transparency.
* A clearly defined share price and valuation of the business.
* An ongoing (secondary) market for the trading of shares in the company.
* The possibility of retaining and rewarding employees using equity-linked incentive schemes.
* A potential stepping stone to a listing on another global market.
* A route to a partial or full exit for the existing owners.
Bridging the funding gap
Perhaps the biggest appeal of a stock exchange listing is the access it offers to a new pool of capital. Bank loans, angel investment, venture capital, private equity and alternative methods such as crowdfunding are all forms of finance that firms may use at various stages, but these are not always easily accessible. A listing can fill that funding gap by giving access to new sources of investment. Indeed, some investors will deal only with listed entities, because of their associated standards of governance and the liquidity offered by secondary market trading.
Making it possible
The International Stock Exchange provides all the benefits of listing on an established market, plus a tailored offering designed to meet the needs of a growing business. Typically, the exchange fees will total £12,000 in year one – for admission and the annual charge – and £6,000 a year for the life of the listing. There will be adviser fees too, but the total package will still cost less than those offered by traditional markets. It is complemented by our proportionate listing requirements, which include the stipulation that a company is worth at least £1 million upon flotation. This is also attractive for a wider range of firms because it enables an earlier listing.
Growth in action
By way of example, consider Likewise Group: after acquiring two businesses in its sector, this Birmingham-based distributor of floor coverings floated on The International Stock Exchange in January 2019 to raise funds for working capital and further M&A activity. The company had initially raised £7 million, taking its market capitalisation to £12 million upon admission. It has since raised another £8 million and completed three more acquisitions, including a reverse takeover. There has also been an active secondary market in its shares.
Listing is likely to be a longer-term goal for many businesses, but it is useful to recognise that The International Stock Exchange’s offering makes this viable at a much earlier stage. It could therefore help business owners to access capital and grow their companies sooner than they might ever have imagined.