When a company is first formed, it must complete a series of steps before being listed on the stock market. The most important is finding an exchange for your company’s shares and finding people who are willing to buy them. There are several ways for a company to get listed on the stock market, but the most common way is for a company to apply to a stock exchange. To apply, a company must meet many requirements and usually supply financial information about the company. Once listed, the company’s stock can be bought and sold on the stock market. In this post, we will go over some of the more usual methods to get your business listed.
Choosing A Stock Market
On the surface, choosing where to list your company may seem an easy decision. The US is the largest stock market, so of course, you should list your company there. Or perhaps you think that keeping your company in your home country will give the company an edge and make it more unique. The truth is it’s not so simple, and there are several factors you should consider before deciding where to list your company. Some companies choose a stock market based on their ticker symbol, allowing people to find them more naturally. For instance, if an investor is looking to buy Tesla shares, all they would need to do is to type: “Buy $TSLA Stock” and he or she would have available options before them. You can see how Tesla’s stock symbol makes it straightforward for people to search for them. Choosing a stock exchange to list your company on can significantly impact your company’s success. However, the choice is complicated by a lack of transparency: many exchanges do not publish the criteria for listing. The ones that do may have murky or even conflicting requirements. With so many different stocks to choose from, choosing a stock market is a daunting task. You should choose a stock market based on the following criteria:
- The number of shares listed.
- The range of shares available.
- The number of investors.
You should also consider if the stock market you choose has an investor base that has a similar investment philosophy to yours.
Nevertheless, the main factors are dependent on what you aim to achieve. For example, you will probably want to list an exchange of the country where your principal shareholders live to reduce friction. On the other hand, if you are in a developing country and want to appeal to a broader audience, you will probably consider one of the more influential exchanges like the NASDAQ or the London Stock Exchange.
Appoint a Sponsor
For many stock markets, you will need to find a corporate sponsor who can guide you through the process and inform you about what is acceptable and not. They will also aid you in getting all relevant paperwork to present to the administration body. The more help you get with this, the more streamlined the process will be.
Find an Underwriter
An underwriter is a financial institution that ensures that funds are available for a company’s stock offering. The underwriter is the party responsible for finding the buyers for the stock being offered for sale. The underwriter takes the risk that the company may not sell all of the shares being offered for sale, meaning that the underwriter would lose money. As used in the financial world, an underwriter is an individual or corporation that can find clients to buy stocks or bonds. They put forth the initial capital to purchase the stocks or bonds and then sell them on the secondary market at a slight markup. This is a crucial step to ensure that you will have interested buyers for your initial floating and therefore won’t be a flop to be written about in the following days’ financial news.
Find a Broker
An individual broker will assist in setting the price for your shares and market your firm when it becomes publicly traded and after the event.
Find an Account
An account will be vital to ensure that your business doesn’t have any irregularities that could sink your application or even get you into legal trouble. Once you go public, your company must disclose all financial information regardless of the stock exchange you choose, and you can’t afford to be seen misleading investors, which leads us nicely to the next point.
Find a Lawyer
As with most non-creative things related to your company, you will need to find an excellent lawyer to aid you through the inevitable legalese and warn you of any disclosure requirements and obligations you will have to your public investors.
Apply To You Exchange Of Choice
Finally, you will need to get all of your paperwork together and apply. This process involves sending in your submission to the body in charge of overseeing new members. The Securities and Exchange Commission requires you to submit Form S-1, a registration statement, to apply to be listed in the US. An S-1 form is filed with a corporation to register securities on the US stock market. The purpose of this form is to show the Securities and Exchange Commission that the company is a legitimate business that is allowed to issue shares. The s1 form lets the SEC review its financial records and take action against the company should there be any issues with its finances. A check for net proceeds is written to the company on the IPO date by the underwriter. Once the S-1 is approved, the underwriter selects the IPO date and handles the sale. The underwriting agreement is signed the night before the issue goes live.
Many things could scupper your chances of successfully listing your company on a stock exchange. Nevertheless, with proper preparation, you should get through the process and sell shares of your company to the public. You should also note that even after a successful listing, the job doesn’t end. You will need to file regular reports to the financial authorities in charge of regulation and keep your shareholders updated.