Law Flotation of C. Securities

Floating on the stock market
The term float refers to the regular shares a company has

issued to the public that are available for investors to trade. This
figure is derived by taking a company's outstanding shares and
subtracting any restricted stock, which is stock that is under
some sort of sales restriction.
METHODS OF FLOTATION
You will need to discuss the different methods of going public with
your advisers. There are three principal ways to come to market,
ranging from an 'introduction’ to the market – where no new
money is raised – to the ‘initial public offering’ (IPO), where
institutions and private individuals are invited to subscribe. A
halfway house is a ‘placing’ in which shares are offered for sale
on a selective basis, primarily to institutional investors.
Your choice will depend on the nature of your business and its
capital requirements.
Introduction
In an introduction, a company joins our markets without raising
any capital. In general, a company can do this if over 25 per cent
of its shares are already in public hands and there is a fair spread
of shareholders. An introduction involves no underwriting fees and
little requirement for advertising. However, the opportunities for
boosting your company’s profile and visibility are limited.
Placing
A placing usually involves offering your company’s shares to a
selected base of institutional investors. This allows you to raise
capital with lower costs and greater freedom and it gives your
company more discretion to choose its investors. The result,
however, is a narrower shareholder base, and as such there may
be lower liquidity in the shares once your company has been
admitted to market.
Initial public offering

In an initial public offering (IPO), your adviser offers your
company’s shares to private and/or institutional investors and
usually arranges for the offer to be underwritten. An IPO attracts
private investors who are important in increasing the liquidity of a
company’s shares. It is normally the most expensive route to
market, often used by larger companies or those looking to raise
substantial amounts of capital.
Advantages and disadvantages of stock market flotation

Even if your business is suited to flotation, it may not be the right choice
for you. Being a public company can present a range of benefits to your
business, but there are also issues that might require careful
consideration.
Advantages of stock market flotation

The benefits of stock market flotation could include:
 giving access to new capital to develop the business
 making it easier for you and other investors - including
venture capitalists - to realise their investment
 allowing you to offer employees extra incentives by
granting share options - this can encourage and motivate your
employees to work towards long-term goals
 placing a value on your business
 increasing your public profile, and providing reassurance to
your customers and suppliers
 allowing you to do business - eg acquisitions - by
using quoted shares as currency
 creating a market for the company's shares
Disadvantages of stock market flotation
However, you should also consider the following potential problems:
 Market fluctuations - your business may become
vulnerable to market fluctuations beyond your control - including
market sentiment, economic conditions or developments in your
sector.
 Cost - the costs of flotation can be substantial and there are
also ongoing costs of being a public company, such as higher
professional fees.
 Responsibilities to shareholders - in return for their
capital, you will have to consider shareholders' interests when
running the company - which may differ from your own objectives.
 The need for transparency - public companies must
comply with a wide range of additional regulatory requirements
and meet accepted standards of corporate governance including
transparency, and needing to make announcements about new
developments.
 Demands on the management team - managers could be
distracted from running the business during the flotation process
and through needing to deal with investors afterwards.
 Investor relations - to maximise the benefits of being a
public company and attract further investor interest in shares, you
will need to keep investors informed.

Law Flotation of C. Securities

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Floating on the stock market

The term float refers to the regular shares a company has

Initial public offering

Advantages and disadvantages of stock market flotation

Advantages of stock market flotation

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