Pros and cons of admission to Stock Exchange

There are pros and cons of listing your public limited company (PLC) with The Stock Exchange to consider carefully. After admission to the Stock Exchange, the public would be able to buy and sell your company shares on the Stock Exchange easily and freely.

The pros of listing

Company shares

Your company shares are publicly traded on the Stock Exchange. Your company share value could go skyrockets when the public has confidence in your products and services.

The fact of being a listed company may improve the status of your company within the market in which it operates.

Future capital

Your company would be able to raise a future source of finance by issuing new shares to raise additional monies in addition to borrowing money from a bank.

This is for an acquisitive company that wishes to grow by means of acquisitions, you may be able to offer your quoted shares as full or part payment of the purchase price for the company you are acquiring. It is an attractive and cost-efficient alternative to borrowing money or using your own cash reserves.

Access to potential investors

Your company would have access to a wide range of potential investors in the sense because all your company shares, including minority shareholding, are freely tradeable on the Stock market.

Plus, there are various prohibitions by law to prevent insiders trading. Thus, this will prevent to abuse of your company’s sensitive information for personal’s benefit.

The cons of listing on the Stock Exchange

Approved sponsor

Your PLC would need to engage an approved sponsor to assist you when seeking premium listing and admission to the Stock Exchange. Your approved sponsor must have the skills and experiences of listing companies. Furthermore, they must be registered with the Financial Conduct Authority. You cannot just hire any firm of accountants to assist you with your premium listing.

3 years clean financial statements

Your company have must at least three years of audited financial statements and preferably all your financial statements are issued with unqualified audit report prior to admission thereafter your company must submit financial statements and company accounts every six months.

Cost of maintaining a listing

Seek and maintain a listing can be an expensive exercise.

Firstly, your company will have to accept the imposition of restrictions over and above those imposed on your company by the Companies Acts. For example, your company secretary must have a minimum professional qualification. He/she can handle Companies House filings such as confirmation statement and other notifiable events.

On top of that, your company also subject to other legislation which affects public listed companies. This is the price to pay for your company shares being made more easily marketed.

Disclose your company performance

Your company has the obligation to make public information relating to your current performance and future prospects. This will give your company’s current and potential future shareholders adequate information on which to base their decisions on how to deal in your company’s shares.

Be the takeover target

Your company could be the target of a take-over by an acquisitive company. Your potential bidder is able to acquire a stake in your company through the open market. However, there are a number of mechanisms in place to ensure that your company is aware if it is the target for a potential bid.

Share prices fluctuate

Your company activities become the subject of much closer scrutiny by both their shareholders and other interested parties. This includes potential investors and the press. At the same time, your company share price will depend on the market’s view of your value. Thus, your share price can fluctuate, sometimes dramatically, in response to both good and bad news about your company.

Knowing the pros and cons of listing on the Stock Exchange would help you to plan better.

Approved Sponsor

Public limited company (PLC) seeking listing in the Stock Exchange Market must use an Approved Sponsor registered with Financial Services Authority to handle your listing application with the UK Listing Authority namely the London Stock Exchange.

Approved Sponsor must be a person or a firm with relevant knowledge and qualifications to undertake your PLC listing representation. He or the firm must

  • be an authorized person or a member of a designated professional body.
  • Be competent to provide a sponsor service per Listing Rule 8.
  • Have systems and controls in place to carry out the role as a Sponsor per the Listing Rule 8.

The role of your sponsor is to ensure your PLC comply with the listing rules. They also provide guidance throughout your PLC flotation period. Your approved sponsor work closely with FCA too.

Your Sponsor must have good knowledge of the Companies Act apply to a public limited company. For examples, a PLC cannot file unaudited company accounts. Know what information is important when comes to filing the confirmation statement and so on.

You may contact the Financial Conduct Authority for a list of sponsors if you are considering listing your public limited company at the London Stock Exchange.

12
%d bloggers like this: