The first thing you need to know is how the stock market works. The stock market is comprised of many different companies, all selling shares to investors. These shares are then traded back and forth among investors in an effort to make a profit when the price rises or falls. If at any point, the company no longer wants to be on the stock market, they can sell their shares in order to get off the list. There are two major ways businesses for a company to get listed on a stock exchange: Initial Public Offering (IPO) or secondary trading after being taken over by another company.
Initial Public Offering
An IPO is the most common way for companies to get listed on the stock exchanges. All a company has to do is decide on a price for their shares, which can be any number they want. The business owner then files paperwork with the SEC. And if it is approved, investors begin bidding on how much they would pay for each share of the business. Once all the shares are sold and money has been raised from investors, the company gets to stay on the stock exchange or get taken over by another company.
If all goes well, this process can be extremely profitable for the owners of a business. But, there are several risks involved with an IPO. Like, if the shares that investors are bidding on start to fall in value, they may find themselves buying less of them than they would have liked just so they can make a profit on their investment. Other risks include starting a stock market bubble, losing control over your business due to being listed, and many more.
Secondary trading
After being listed on the stock exchanges, the company must do well or the other companies that have bought those shares may decide to sell them back to you at a lower price. If this happens too many times or there is an issue with some of those companies, you could find yourself getting delisted from the stock exchange and losing your funds.
Many businesses have found the benefits of being listed to be quite beneficial. Being on the stock exchanges gives companies a large base of potential consumers. In this sense, being listed on the stock exchange means that anyone can buy your product or service and make a profit from it regardless of your company’s size. Having a large base of customers to sell to can also increase the number of people who use your product or service. As an entrepreneur, this benefits you as it makes it easier to market and promote your business online which allows you to reach an even larger audience than before.
Being listed on the stock markets also allows you to raise capital through the sale of shares. When being listed, shares can be sold instantly to investors who have put down money for the company’s future success. Being listed on the stock markets can also give your company more clout in negotiations with other parties such as large corporations and also help you achieve more when it comes to exporting your products or services overseas. Knowing that you are listed on the stock exchanges means that other companies will be more likely to deal with you instead of notifying their competition of an upcoming deal with your company or taking action against your business by refusing a potential offer from another corporation.
To Conclude,
Being listed on the stock exchange can also be used as a form of investor relations. Instead of having to approach various investors one by one, your business can be listed on the stock exchanges which allows companies to reach numerous investors at once.
All in all, being listed on the stock exchanges is a great way for a company to gain more clients and raise more capital due to more people looking into the company and their products or services. The only real downside is that you have to do well for those investors or they will sell those shares back to you at a lower price. If you don’t feel comfortable with taking this risk or cannot afford it, then an IPO may not be right for your business.
