What are the benefits of a listing?
Tuesday, 12 Jun 2018
The benefits of a stock exchange listing go beyond just accessing capital and include demonstrable adherence to recognised standards of transparency and governance, says IoD Member Carolyn Gelling, Head of the Isle of Man Office at The International Stock Exchange Group (TISEG).
There are numerous reasons why business owners and company directors may consider it beneficial to list their company on a stock exchange, such as The International Stock Exchange (TISE).
These reasons might include one or more of the following: enhanced prestige and profile for the owners and their business; access to a new pool of capital which will help to take the company to the next stage of its development; a clearly defined price for the shares and a valuation of the business; provision of a stepping stone to another major global exchange; and a route to exit.
However, a stock exchange listing also provides demonstrable adherence to well recognised standards of transparency and governance.
Transparency & governance
Companies wishing to list and to continue to be listed must adhere to the listing rules of a stock exchange and at TISE this is carried out in conjunction with a listing sponsor, which must be appointed at all times.
The sponsor is responsible for helping the company with the listing application process, which includes demonstrating that the company meets the minimum conditions of listing, completion of the listing document, disclosure requirements and responsibility statements.
TISE’s own market authority assesses a company’s suitability for listing and carries out ongoing surveillance to protect the integrity of the market.
"A stock exchange listing… provides demonstrable adherence to well recognised standards of transparency and governance."
The sponsor is also required to assist the company in meeting its continuing obligations post listing, including notifications to the market and the preparation of audited financial statements to internationally recognised standards (e.g. IFRS, UK GAAP, US GAAP).
The audit provides third party scrutiny and review of the financial position of the company which allows investors and the wider public to be able to make an evaluation of the performance of the company and in particular, in comparison to the objectives outlined in the listing document.
Transparency and good corporate governance can make investment in listed companies more attractive for investors.
Indeed, some investors can only invest, or have to invest a certain proportion of assets, in listed products because they know that the company in which they are investing is adhering to specified standards of transparency and governance.
"Transparency and good corporate governance can make investment in listed companies more attractive for investors."
It is these requirements which mean that owners need to have given thought to whether or not they see an exchange listing playing a part in the development of their business well before they actually reach that stage.
By giving this consideration early in the company’s life, business owners and company directors can start to make the necessary preparations for an exchange listing so that they are in the best possible position to meet the required conditions at the time they wish to be admitted.
Isle of Man companies might choose to list on TISE because it offers the advantage of being able to facilitate the listing directly from the island. In addition, TISE also has a fee regime and admissions criteria which are better suited to meeting the needs of growing businesses than those of some larger exchanges.
In fact, a company may use a TISE listing as a way to raise its visibility and get comfortable with the requirements of being a listed company and then, once it has grown, transition to being listed on a major global exchange. In this way, TISE might be considered an ‘incubator exchange’ or a ‘stepping stone’.
For many businesses that is likely to be a longer term objective but in the meantime, they should still ensure that they are adequately planning for the future and as part of that, consider how an exchange listing could aid their ambitions.
This article originally appeared in Isle of Man Agenda Magazine, Spring 2018.
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