Floating on a stock market: your options

Advantages and disadvantages of flotation

Even if your business is suited to flotation, it may not be the right choice for you. There are a number of key advantages and disadvantages to weigh up.

Advantages:

• You get access to new capital to develop the business.
• A float makes it easier for you and other investors - including venture capitalists - to realise their investment.
• You can offer employees extra incentives by granting share options.
• Being a publicly quoted company can provide customers and suppliers with added reassurance.
• Your company may gain a higher public profile.
• Having your own traded shares gives you greater potential for acquiring other businesses, because you can offer shares as well as cash.

Disadvantages:

• Your business may become vulnerable to market fluctuations beyond your control.
• The costs of flotation can be substantial and there are also ongoing costs such as higher professional fees.
• You will have to consider shareholders' interests when running the company - which may differ from your own objectives.
• You may have to give up some management control of the business and ultimately there's a risk the company could be taken over.
• Public companies have to comply with a wide range of additional regulatory requirements and meet accepted standards of corporate governance.
• Managers could be distracted from running the business by the flotation process, and by dealing with investors afterwards.
• Employees may become demotivated. If shares are only offered to selected employees, those without shares may resent those who have them if the flotation is successful. In addition, shareholding employees could feel that there is little left to work for if they are sitting on valuable shares.

You can find out about the advantages of flotation on the London Stock Exchange website - Opens in a new window.

Subjects covered in this guide

• Introduction
• Is your business suitable for flotation?
• What is a flotation and why consider it?
• Advantages and disadvantages of flotation
• Choose the right market
• Appoint your advisers
• Prepare for a flotation
• Price your business' flotation
• The flotation process
• Here's how we prepared our business for flotation

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