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Public Company Securities Registration
So you’re thinking about taking your privately held company public, but you have some reservations or concerns, right? That is completely understandable. Taking your company public is a big step and it can be fraught with unknowns, headaches, problems, confusion, high (unexpected?) costs… But fear not. We are here to help you every step of the way and, as a result of our research and experience, we can provide you with time and money saving advice/options.
This short article will go over some of the benefits of going public, briefly overview some available stock markets/exchanges, and discuss a relatively quick and cost efficient method / route to becoming publicly traded.
Benefits of being a publicly traded company
Why would a small or medium sized business owner want to take her or his privately held company public and deal with all the rigmarole associated with public status? That is a good question. Here are a few of the major benefits:
- Going public gives your company more credibility and prestige with customers, clients, employees, the press and the financial community.
- Being a public company provides the company founders with a long-term exit strategy
- Being a public company offers more liquidity for the founders and minority shareholders and investors.
- Public companies can more easily finance growth through equity capital rather than debt capital because:
- The company stock can be used as currency for mergers and acquisitions;
- Equity is available for an unlimited period of time and can be used without restrictions; and
- Being public increases your company’s awareness and visibility vis-à-vis investors.
- Being public makes it much easier to raise capital and reduces the need for expensive, and often controlling, venture capital financing.
- Public companies are often valued much higher than their private counterparts.
- Being public gives you more options for raising capital; you can raise capital through both public and private offerings. Thus you have the benefit of access to more sources of capital.
Now that you understand the benefits of being a publicly traded company and feel like this might be a good idea for your company, let’s discuss your options as far as where to list your shares.
You can list your shares in the United States on the over-the-counter market supervised by the Financial Industry Regulatory Authority (FINRA) – Premier QX, Prime QX, Bulletin Board or Pink Sheets; or in London on the AIM (Baby London Stock Exchange), neither of which has any asset or revenue requirements. However, both of these markets are saturated with companies, so any one company’s visibility to investors is quite limited, and both are hugely time consuming and cost prohibitive. A new listing on the US over-the-counter market generally takes 9 – 12 months and can cost anywhere from $150,000 to $400,000 or more, while a listing in London on AIM takes about 6 – 9 months and can cost upwards of $750,000 to over $1 million.
A better option is to list your shares in Germany in the Frankfurt Stock Exchange, which is one of the most efficient capital markets in the world, the largest stock market in continental Europe and the third largest in the world. A listing in Frankfurt provides your company with a pan-European platform and attracts the attention of international investors.
Advantages of listing at the Frankfurt Stock Exchange
- One of the most cost-efficient and fastest listing processes worldwide
- For companies currently listed in the US on the Bulletin Board or Pink Sheets, you can be dual listed, up and trading on the Frankfurt Stock exchange in 3-4 weeks.
- If you are a brand new corporation, you can be listed on the FSE Open Market in as little as 60-90 days.
- Increased exposure to analysts and investors
- There are fewer companies listed on the Frankfurt Stock Exchange within the Open Market so there is less competition for attention from analysts and investors.
- Lower cost of procedures
- Your company is not required to file or prepare and Securities and Exchange Commission audits or Public Company Accounting Oversight Board audits if you are listed in the Open Market
- You can use your admission on the Open Market and Entry Standard levels as a stepping stone to a future listing on the higher levels of the exchange, the General Standard and Prime Standard levels.
- Open Market – this is the fastest way to gain access to exchange trading as there are few formal entry requirements and zero on-going or follow up obligations. Companies benefit from the easy, fast and cost-effective admission to exchange trading without any German federal or European Union (EU) market regulation; however, participants are subject to German Federal Financial Supervisory Authority (BaFin) rules with respect to insider trading and market abuse. Moreover, companies enjoy an opportunity to move up to Entry Standard or the EU regulated General Standard and Prime Standard markets. Your company may also have world-wide access to investors through Xetra, the Exchange’s electronic trading platform, which requires the admission of your securities via a designated securities sponsor.
- Entry Standard – like the Open Market, this level is solely exchange regulated, yet the Entry Standard provides a showcase that increases investor visibility for companies that wish to supply investors with additional information and disclosures. Companies on the Entry Standard are more transparent to investors because companies are required to submit a prospectus, file annual audited financial statements and semi-annual reports. A listing in the Entry Standard gives your company great liquidity, worldwide access to investors through Xetra, the Exchange’s electronic trading platform, and increased visibility while simultaneously minimizing entry and on-going reporting requirements.
Spotlight on the Entry Standard Market
Companies seeking to have their shares traded efficiently while meeting few formal requirements opt for Entry Standard. It is a particularly attractive option for young growth companies and established small and medium-sized companies because of the ease of access, the minimal on-going reporting requirements and the facility with which they can transition to the higher levels of the exchange.
Entry Standard offers companies many advantages. Chiefly, shares trade quickly and easily, which allows companies the opportunity to make use of the stock market’s core functions as a trading platform and price discovery mechanism, while increasing their visibility among investors at the same time. Moreover, the lower level of regulation on the Entry Standard makes the cost of inclusion significantly lower than for obtaining a listing on the EU-regulated market (such as the General or Prime Standard).
Advantages of Entry Standard at a glance:
- Quick and cost effective access to the capital market
- Few formal requirements
- Low continuing transparency requirements
- Use of the stock market as a trading platform and price discovery mechanism
- Increased visibility among investors for companies from all sectors
- Efficient trading using both floor trading and electronic trading on Xetra
- Companies can prepare to move up to the EU-regulated General Standard and Prime Standard markets
- One-stop access to all capital market functions at the only fully integrated exchange organization worldwide
Now that you have all the information and realize the unique benefits of being a public company listed on the Frankfurt Stock Exchange, you are ready to take the next step and contact our office to begin your odyssey of listing as a public company.
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