Every day new companies go public on the stock exchange and offer an initial public offering to buy company stock. Some companies fare well and thrive as a member of the stock exchange for many years to come, while others come and go quietly with little notice. The reasons for deciding to list a company on the stock exchange vary, but there are benefits to those that do so.
Many companies strive towards the goal of going public for a variety of reasons. One of the most obvious benefits of being listed on the stock exchange is the increased availability of immediate capital. When a business owner or organization lists a company, they are essentially offering a tiny piece of the business for sale to anyone who is willing to buy. Investors purchase shares in the company to become stockholders, and the revenue generated from selling shares becomes immediate cash flow that can be used to invest back into company growth, development and longevity.
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A business owner who has struggled to raise capital or obtain financing for investment in company growth might use a public offering as an alternative to using the company's profits. It can speed up the process of scaling to meet demand or future growth projections.
Another one of the advantages of listing on the stock exchange is that a company that chooses to list on the stock exchange will often get increased company exposure as a result. Initial public offerings are usually advertised and may be covered in news stories, investment journals and financial magazines. The newly listed company might be profiled in an investment periodical or television program, and extensive details concerning the business and the product or service it provides would be reported in all printed materials and reports.
According to Investopedia, if an initial listing on the stock exchange does well, it can generate even more attention and exposure. Investors would then be more interested in investing, customers would be more interested in purchasing, potential employees would see more benefit in accepting a position and the company would experience even more growth.
Potential investors, customers and employees care about the reputation and trustworthiness of the companies they do business with. Listing a company on the stock exchange requires it to follow the rules of the exchange, which can bring peace of mind to these interested parties.
The Corporate Finance Institute reports that a stock listing requires that the company must also be completely transparent in all business dealings and in the reporting of financial data, because a publicly listed company is subject to regulations it might otherwise be exempt from. Listing a company on the stock exchange helps to promote increased accountability for the actions of all company insiders, managers and leaders, which makes corruption less likely and more difficult to conceal.
In addition, a company that is required to be transparent and financially accountable might enjoy greater success than a privately held company. Because it is held accountable to a financial life based on integrity, its financial foundation is on greater solid ground, making it easier to grow the company and gain the trust of the public.
Consider Also: Financial Lit: What is an IPO, and How to Follow the Stock Market