The term “public listing” is synonymous with “Initial Public Offering” or IPO. A private company with growth and expansion as its goal can go public to raise capital. Once the CEO of the company has formally signed on the stock exchange on the day of the initial public offering, the company will be considered a public entity and therefore a “publicly traded” company on the Stock market.
Purpose of the public listing
Before the IPO, there should be an agreement between the founders of private companies on the amount of capital to be raised and on the spending plan for that capital. It is that during the planning stage, one or two of these IPO objectives would be expressed by someone on the management team.
· Acquire new equipment, software or build infrastructures.
Diversify products or services through research and development.
· Expand the operation to new regions.
Pay off old or existing debts of the company.
· Get more money from original investments.
Public listing process
While IPO has become popular jargon in business and economics for decades, it is actually a complex and meticulous financial process that takes time and money to execute. It starts with a private company that hires an underwriting firm or investment banker to help them through the entire IPO process. It goes without saying that for a company to go public, it must also invest in people, time, and money.
When going public, a company is assumed to be co-owned by a new group of investors. They are the same investors who before the IPO, or during the “road show”, showed interest in becoming co-owners of that particular company. Based on the rules of public listing, a company that intends to sell its share capital in the form of shares can choose the market in which it wants its shares to be traded electronically. It can be on the NASDAQ, NYSE, or any stock exchange in a given country subject to its existing business rules and business policies.
Functions of the underwriting firm and the issuing company
It is the underwriting firm that helps the IPO issuing company in accordance with the public listing rules established by the Securities and Exchange Commission (SEC). The SEC is an organization that reads, interprets, and approves a prospectus based on public listing regulations, legal aspects, and financial policies. During the entire course of the public listing, the insurer performs the following main functions and responsibilities.
Set the initial or target offering price for the shares
Help the company create the prospectus (a formal legal document filed with the SEC)
Help the company balance the supply of shares with the demand of investors
Distribute stocks to the right investors through known distribution channels and contacts
The success of a publicly traded company depends largely on the collaboration between the issuing company and the insurance company. Your goal is to get the IPO done on time, on target, and in accordance with SEC rules. On the one hand, company executives must make sure they have the business plan well-written and ready to be presented to potential investors before the IPO. On the other hand, underwriters must dedicate their experience to creating the prospectus to be approved by the SEC.
Succeed with the initial public offering
The price per share is what will determine the fate of a company in the hands of public investors from the day of the IPO until approximately one month of trading. The target price could go up or down depending on the supply and demand of the shares. A company is said to be successful in public listing if it was able to exceed its target capital due to appreciation in the value of its shares (which is often the case).
Once a company goes public, its executives, employees, and stakeholders must work together to ensure shareholder satisfaction.