There comes a time in the life cycle of a business where it needs to raise a significant amount of funding to be able to go forward with its growth plans, beyond its existing access to capital. While bank financing or venture capital may be options, they may not always be the most appropriate and ultimately may not lead to the particular desired outcomes of the business.

Business owners should consider listing their companies for the numerous benefits this offers them. A savvy business can harness the power of the stock exchange to grow and enhance its operations and profit margins. For starters, going public allows businesses to access the capital they require to invest and grow. Obtaining greater financial liquidity means the business can dispose of other direct sources of alternative financing, without compromising its own capital.

Being listed on a stock exchange gives companies increased visibility and recognition, locally and potentially internationally. By offering stock to the public, companies gain an enhanced profile and public companies are much more visible and recognisable than others that remain privately owned. The increased visibility can attract new clients and draw positive attention from the press, which otherwise it would not be able to attract. This position of prestige and solid standing will mean good leverage in negotiations with banks, and will also attract top talent. Moreover, listed companies are said to perform better than their private counterparts.

After listing, shareholders will have control over a company with a greater capital base. Going public also brings about an increased valuation of the business that can help the company in its succession planning. Listing provides entrepreneurs with an exit route upon retirement, who will benefit from the ability of making a better return in comparison to liquidating their position in a private company. Moreover, companies can also offer share option packages to employees which increases employee retention and motivation, since everyone would stand to gain from a performing company which is also reflecting increased value.

Listing of one’s company is a leap of faith

When companies go public, they will be subject to additional financial and regulatory compliance, and this comes with associated costs. People at every level of the business – from owners to employees – must be ready to accept the disciplines inherent in having shares traded publicly, where all levels of operations are required to be well structured and adhere to sound principles of corporate governance. This said, the benefits far outweigh the additional responsibilities that come with being listed.

Most businesses invariably reach a crossroad and decision-makers need to take strategic decisions on how their company will move forward. Will the business remain confined by the capital requirements of its founders and its immediate successors? Or will it take a leap of faith and expand the business locally and potentially beyond its confines?

The main goal of any entrepreneur is to maximise returns and in particular cases, for this to be achieved, they need to consider the full spectrum of financial opportunities, including listing on a stock exchange. The decision will very much depend on the amount of financing which can be raised, the speed at which it can be raised and the willingness to have a more structured organisation.

Entrepreneurs may consider listing their company on a stock exchange as a pivotal point of their financial success, as well as a seal of proving the success of their company. While listing on the main market may be an early step for small to medium-sized enterprises, Malta offers SMEs the possibility of listing via the Prospects trading facility on the Malta Stock Exchange.

Trading since 1992, the MSE has provided local and now international entrepreneurs with a platform which assists them equally in gaining a foothold in the local equity market. The MSE is an ideal location for second or third generation family businesses to raise capital through the equity market or financing through the bond market.

The MSE recognises that the risk capital which fuels the growth and expansion of larger businesses is largely not available to SMEs, creating a financing gap. Prospects is an initiative that intends to close this gap.

Listing of one’s company is a leap of faith, but with the correct structure, advisors and partners, it can open new opportunities for those adventurous enough to take such a strategic decision.

Nicholas Warren is a senior manager in the Financial Services Practice Group at Chetcuti Cauchi Advocates.

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