Listing and Initial Public Offering of Securities
Any company that has ambitious development plans will at some time or another consider the process of becoming public. If you hear that a company decided to “go public” or “float its shares”, then it’s setting up for an Initial public offering (IPO) and plans to have its shares listed or admitted to trading on the stock exchange.
IPO is the first sale of stocks by a company to the public through the stock exchange.
Companies can list their outstanding or newly issued securities. While the listed status of a security does not guarantee that it will do well in the market, the fact that its issuer was able to comply with the requirements and qualify for listing is considered as a sign of "quality".
Advantages of Listed Companies
IPOs have long been the main source of capital for companies worldwide. This brings us to the advantages of doing an IPO and being listed on a stock exchange:
- IPOs are a way toraise equity capital to expand and grow the business;
- IPOs normally ensurelower cost and long-term funds compared to borrowings from banks;
- an IPO and an exchange listing canenhance the reputation and transparency of the company
- the issuer builds up ahistory in the market: once you’ve done your IPO successfully, it will be easier to generate equity funding from the stock market in the future;
- as a rule, listed stocks are more liquid, due to which they can be cashed-in quickly.
What it Takes to Live as a Listed Public Company
While being a very rewarding initiative for reasons mentioned above, IPO is also quite an expensive and rigorous commitment. Apart from underwriter fees, the issuer company will need to ensure that it complies with best corporate governance practices and remains at all times transparent to the public, its existing and potential shareholders. This, apart from the annual audit, implies maintaining an up-to-date website, setting up communication channels including media, establishing an Investor Relations function. The larger number of shares you want to allocate to minor holders (see “free float”), the larger the “audience” you are accountable to.
In 2010 Armenian Government approved Armenian Corporate Governance Code, which set standards of corporate governance in line with international best practice, taking into account the Armenian practices and framework. Good corporate governance allows companies to increase their competitiveness, economic efficiency and growth, to attract the capital required for economic growth and reduce the cost of such capital, improve operational decision-making and the company’s reputation, as well as to promote protection of and cooperation with stakeholders who have a legitimate interest in company’s performance.
Listing at NASDAQ OMX Armenia
Here are just some of the advantages that listing on NASDAQ OMX Armenia is able to provide:
- flexible list structurewith NASDAQ OMX Armenia’s free market “C” offering a chance to “test the waters”: build track record in the capital market and get prepared to comply with higher listing criteria;
- listing requirements and fees adapted to local conditionsgive cost advantage compared to other international exchanges;
- lower fees for underwriting and advisory servicesoffered by NASDAQ OMX Armenia member investment companies and banks, as compared to rates charged by overseas consultants and brokers;
- continuous coverage from local mediaattracting added public attention to the company and its products;
- help within arm’s reach: NASDAQ OMX Armenia staff is always here to provide advice and assistance on all matters related to company listing and listing maintenance;
Companies that are interested in learning more about doing an IPO and getting listed on NASDAQ OMX Armenia are kindly requested to contact Nerses Hakobyan, Head of Listing, Tel.: +374 10 54 33 21 ext.120. Stock exchange member companies are also there to help and provide professional advice and any assistance that you may require.