Floating on a stock market: your options
Price your business' flotation
Deciding on the right price for your business can be one of the most difficult aspects of a flotation, and can be a matter of intense discussion between you and your advisers.
Most companies are valued on a multiple of their historical and expected future earnings. If you set a value more geared to future earnings it's often best to err on the side of caution, because if you fail to achieve those earnings your share price is likely to fall.
A number of factors can influence the pricing decision. If your business is in an exciting, fast-growing sector or is market leader in its field, investors may be willing to pay a premium for the shares.
Sometimes it's best to set a share price at a level lower than you would normally value the business. This may help your share price to rise after flotation - making a good impression on potential future investors.
Many companies often don't find out whether they have got their pricing decision right until a week or so after the flotation has taken place.
Read more about valuation methods in our guide on how to value and market your business.
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
