(Transfer) Advantages and Disadvantages of Listing Companies

Advantages and disadvantages of listing a company

Listing a company is the dream and goal of many entrepreneurs. However, both advantages and disadvantages coexist in everything. Only by fully understanding it can we properly balance the situation and lead the healthy development of the company.

Positive Role of a company in listing

1. Increase the value of original investors:

From the world's richest people rankings to the China's richest people rankings, the richest people in the rankings share one thing in common, that is, most of their assets are stocks of listed companies.

Once an enterprise is listed, it can bring double benefits to the original investors.

The first benefit is Book income.

The second is the benefits of stock transfer by original investors.

2. Low-cost financing

The development of enterprises requires sufficient capital. Therefore, how to obtain capital becomes the primary issue for entrepreneurs. There are three ways for enterprises to obtain capital: one is the accumulation of profits of enterprises, the second is lending to creditors, and the third is raising capital to investors.

Raising shares to investors is the lowest-cost financing method. First, in terms of time costs, equity financing saves time than profit accumulation. Second, in terms of financial costs, equity financing does not reduce the company's pre-tax profits. From the perspective of the entire company, the company's financial cost is much lower than the debt financing cost. Therefore, the listing of an enterprise can enable the company to obtain low-cost financing.

3. Obtain powerful acquisition capabilities in the Capital Market

The development and growth of enterprises not only rely on mergers and acquisitions between enterprises, but also have different motivations.

The standard capital market operations such as stock exchange, private placement, and tender offer greatly enhance the attractiveness of the acquirer to the acquirer.

4. Improve Enterprise Credit

Enterprise Credit is the basis for external transactions by enterprises in market economy activities. Enterprises with strong credit can easily conclude transactions and reduce transaction costs by making loans, supply, and cooperation, in this way, it is easier to obtain a higher level of credit evaluation because corporate governance norms, management science, and financing are easier.

5. Enhance enterprise cohesion

Competition of enterprises is essentially competition of talents. Employees' sense of belonging and honor will be improved, and their confidence in the company will also be greatly increased.

That is to say, it has stabilized existing employees and is also conducive to attracting talent inflows. Therefore, enterprise listing is conducive to improving the talent competition of enterprises.

6. Improve the visibility and reputation of Enterprises

The enterprise's popularity and reputation are also an important aspect of enterprise competition. It can increase the competitiveness of the company's image brands, facilitate the consumer's goodwill, and improve public relations.

Both the listing of state-owned enterprises such as CNPC and Bank of China, and the listing of private enterprises such as Baidu and Suning have greatly increased the company's popularity and set up a good public image, these are valuable assets of the company.

Risks of listing two companies

1. Weak control of the company

The essence of a company's listing is to sell the company's equity to obtain the capital investment of investors. Therefore, the company's listing will reduce the proportion of the original shareholders to the company's shareholding, is to weaken the control of the original shareholders of the company.

The original shareholder has been converted from pure control of the company or absolute control of the told to relative control.

On the other hand, the pressure on mergers and acquisitions in the capital market, the shares issued to the public may be acquired by the acquirer, and thus compete for control with the original controlling shareholder, it even allows the acquirer to gain control of the company.

The weakening of control rights should be considered by every enterprise entering the capital market.

2. Cost required for the company to go public

Listing a company is not only a financing process, but also a process of constant cost. There are three main costs:

On the first hand, the company's cost to meet the listing conditions mainly includes the cost of asset and debt restructuring, the cost of hiring professional managers, and the increase in the early financial cost to meet the company's performance requirements, standardize the cost of establishing a corporate governance structure.

Second, the company's direct costs for listing, including investment bank financial advisor fees, sponsor and underwriter sponsorship fees, legal counsel fees for legal counsel, audit fees, evaluation fees for asset evaluation, Public Relations fees of financial and public relations companies, audit fees paid by the securities regulatory authority, and listed fees paid to the exchange, the printing fee and media announcement fee of the printing company. Most of these fees must be paid by the enterprise before the company receives a successful financing.

Third, the expenses incurred by an enterprise in order to maintain the listing, including the annual listed fees to be paid to the exchange, the fees for hiring perennial legal counsel and auditors, and the fees for holding regular meetings, the cost of releasing an announcement increases the company's cost to meet the changing requirements for listing, which should also be reasonably calculated by each listed company.

3. Increased supervision caused by Listed Companies

In order to protect the interests of investors, the national legislature has developed a complete set of laws and regulations to supervise the listing of companies, and has established a security supervision institution and a stock exchange, A series of regulatory systems, including investor litigation.

Listed companies have to spend a lot of time dealing with supervision, establish complex corporate governance institutions, spend a lot of time and energy on information disclosure, and establish internal and external monitoring systems. Once problems arise, lawyers and experts should be hired to explain and respond. Improper handling will lead to investigations and litigation, and may even lead to bankruptcy of the company. In short, the increasing supervision and management caused by the listing of a company is also an important risk of listing an enterprise.

4. Business Information may be known to competitors

Each listed company needs to disclose a large amount of information for the purpose of protecting investors. regulatory requirements require that listed companies disclose major information of the company, including important financial data, major transactions, changes in share capital, profit and budget, etc. In this way, some inconvenient commercial information has been made public, and once known by competitors, it may have adverse effects on the Enterprise.

(Transfer) Advantages and Disadvantages of Listing Companies