The Zimbabwean Stock Exchange had been closed for almost 3 weeks but resumed Monday 3 August. While reasons for its closure might not be outrightly clear and this might also make a sceptical small business owner think that listing on the stock market is a bad move for his/her business. Well, as with everything, there are always risks and benefits to be accrued from any decision, in this article I intend to look at some of the benefits of listing on the stock market. Of course, this is coming at a time where our economy is not in the best of health but be that as it may, the dust will settle and companies will want to expand.
Why companies list on the stock market
So, firstly, reasons for listing on the stock market may vary from company to company but the central factor is the desire to raise capital. Capital can be for purposes of business growth or the general improvement of the entity`s functionality. Listing on the stock market is also done as a means of spreading the risk of ownership across a group of shareholders. So, yes, if you are a growth-oriented entrepreneur, listing on the stock exchange should be a thing you might want to consider as you seek out to expand your business journey. While this might be the fact there are more benefits which you stand claim to if you list on the stock market.
Access to capital
Listing on the stock market gives you quick access to capital for your business. If a company seeks to expand its operations which requires huge amounts of money, the stock exchange can be the best place to go. Companies listed on the stock exchange can quickly raise affordable capital by issuing more shares for investors to purchase. The very issuance and selling of shares on the market is the path to gaining capital for a business. Pricing of the shares and the number of shares to be issued is largely dependent on the value of the business and the amount of capital needed. You would want to appreciate the fact that raising capital would be different for a company not listed on such platforms as the stock market.
Reduced Capital Cost
Because the stock market presents an opportunity to raise capital, the cost of raising capital from other sources is drastically reduced. Which is a good thing. This is because, for banks and other such financial institutions, publicly traded companies are less of a credit risk than their privately-held counterparts. This is because listed companies always have ready access to capital which means they are always in a good position to pay back loans of any form. Further to this is the fact that these companies have auditing requirements which make their financial conditions more transparent.
Enhanced Stakeholder relationships
While listing on the stock market guarantees the availability of capital, a company is thus made able to better handle with its stakeholders. Listing on the public market means that a company has to uphold the best of all business practices and this has a tendency of improving relationships between a company and its stakeholders. Further to this is the fact that a company will have a reputation to protect and there is no better way to achieve this besides maintains cordial relationships with stakeholders.
Enhanced Company Profile
Listing on the stock market allows for a company to enhance its profile as a business. As noted from the above, cordial relationships with stakeholders are maintained and there is an increased chance that these stakeholders will make referrals to your business. Consequently, this broadens the scoop of your business as well as its reputation which speaks to your profile as a company. Such an enhanced profile will make the respective company more visible and easily recognisable in the market and economy at large. Because of this visibility, a company retains an increased ability to attract customers and new clients a case which would have been different if the company was not listed on the stock market.
Ability to attract better Employees
Listing on the stock market goes way beyond raising capital for the business but also helps in shaping and improving the brand value. A company listed on the stock market has to fashion its business processes in a way that communicates efficiency, reliability and profitability. Consequently, employees who then become associated with the company speak to these values as they also play a pivotal role in shaping the company value on the market place. Further to this is the fact that access to capital granted by listing on the stock market allows companies to better compensate employees thus arguably keeping them from going to competitions. As a result, a company listed on the stock market will always attract better and vibrant employees eager to carry the company vision further.