Many PLCs seek to obtain listing and have their shares traded on the Stock Exchange. This is the most popular way of seeking additional funding to the business. The advantages and disadvantaged of seeking listing are outlined below.
It will take a great deal of time by the officers of the company (and their advisers) to seek and maintain a listing which is, therefore, an expensive exercise. While there mav be a number of advantages to the company in being listed, the company will have-to accept the imposition of restrictions over and above those imposed on it by the Companies Acts and other legislation which affects listed companies. The key to understanding the need for these restrictions to be imposed is to appreciate that the principal advantage of a company of being listed is that it shares are more easily marketed. Therefore, the company has the obligation to make public information relating to its current performance and future prospects. This will give the company's current and potential future shareholders adequate information on which to base their decisions on how to deal in the company's shares.
While unproved marketability (in the sense that all the shares, including minority shareholding, will be freely tradable on a market which is open to a wide range of potential investors) is the principal advantage of the company being listed. The mere fact of being a listed company may improve the status of the company within the market in which it operates. Having quoted shares may open to the company a future source of finance it can issue new shares to raise additional monies in addition to borrowing money from a bank. Should the company wish to grow by means of acquisitions, it may find that its ability to offer its quoted shares as full or part payment of the purchase price for the company it is acquiring is an attractive and cost efficient alternative to borrowing money or using its own cash reserves.
While a listing on Stock Exchange can be attractive to an acquisitive company, it can also create problems for a company which could be the target of a take-over itself. Such a company could find a potential bidder is able to acquire a stake in it through the open market, although there are a number of mechanisms in place to ensure that a company is aware if it is the target far a potential bid. Another potential disadvantage, particularly if the company seeking the listing h as traditionally been run by a small a group of directors/shareholders, is that they will find their activities become the subject of much closer scrutiny by both their shareholders and other interested parties (both potential investors and the press) following the listing, Since the price of a company's shares will depend on the market's view of their value, the price can fluctuate, sometimes dramatically, in response to both good and bad news about the company. To prevent people with inside information about the company's activities taking advantage of that knowledge, there are various prohibitions in place to prevent 'insiders' using information for their own benefit which is not freely available.
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