Advantages and disadvantages of listing
Advantages:
1. Improve the financial situation
On the other hand, these funds can immediately improve the company's capital structure and enable the company to borrow at low interest rates. In addition, if the IPO is very successful and the future trend of the market is very strong, the company may issue more shares at a better price in the future.
2. Buy other companies with shares.
(1) listed companies usually acquire other companies through stocks (rather than cash). If your company is publicly traded in the stock market, shareholders of other companies will be willing to accept your shares instead of cash when selling. Day trading in the stock market provides flexibility for these shareholders. When needed, they can easily sell shares or use them as mortgages.
The stock market will also make it much easier to estimate the stock price. If your company is not listed, you must evaluate yourself and hope that buyers will agree with your evaluation; If they don't agree, you must bargain and determine a "fair" price acceptable to both parties, which is likely to be lower than the actual value of your company. However, if the stock is publicly traded, the value of the company is determined by the market price of the stock.
3. Use stocks to motivate employees
Companies usually attract high-quality employees through stock options or equity gains. These arrangements often give employees a sense of ownership of the enterprise, because they can benefit from the development of the company. The stocks of listed companies are more attractive to employees, because the stock market can decide the stock price independently, thus ensuring the realization of employees' interests.
4. Improve the company's reputation
(1) listing can help the company improve its social visibility. Through public channels such as press conferences and the daily performance of the company's shares in the stock market, the business community, investors, the press and even the general public will pay attention to your company.
Investors will make decisions based on good news and bad news. If a listed company is well run and full of hope, it will have a first-class reputation, which will provide it with immeasurable benefits. If a company's trademark and product reputation are not only noticed by investors, consumers and other enterprises will also be willing to do business with the company.
Disadvantages:
1.
The most troublesome thing is that a company has lost its "privacy" in various changes because of its public listing. China Securities Regulatory Commission requires listed companies to disclose all accounts, including the salaries of senior managers, dividends of middle managers and the company's business plans and strategies. Although this information does not need to include all the details of the company's operation, all information that may affect investors' decision-making must be made public. This information must be publicly disclosed at the time of initial listing, and the latest situation of the company must be kept informed thereafter.
(2) Due to the loss of confidentiality, the company may stop paying dividends or reducing salaries to relevant personnel at this time. This is normal for non-listed companies, but it is difficult for listed companies to accept it.
2. The flexibility of managers is limited.
Once the company goes public, it means that managers give up some of their original freedom of action. Non-listed companies can generally make their own decisions. Every step and plan of a listed company must be approved by the board of directors, and some special matters even need the approval of the shareholders' meeting.
② Shareholders measure managers' performance through company efficiency and stock price. To some extent, this pressure will force managers to pay too much attention to short-term interests rather than long-term interests.
3. Post-listing risks
Many publicly listed stock returns are not as high as expected, and some even fall sharply for various reasons. The disappointing reason may be that the stock market is generally depressed, or the company's profits are not as expected, or the public finds that there are no really qualified experts to give them advice when the stock goes public. The setback after the stock listing will seriously affect the profit recovery of venture capital, and even make venture capital unsuccessful. Therefore, when deciding whether to go public, venture capitalists and entrepreneurs will weigh their own advantages and disadvantages, and not going public is not necessarily a bad thing.