WHY SHOULD ANY COMPANY want to be listed on the London Stock Exchange? We often hear about the costs of a listing – estimated at £500,000 yearly – together with the burdens of disclosure and corporate governance. But rarely do we hear quoted company directors extolling the benefits of a listing.
Recently I was at a dinner for quoted company directors who were asked – if they knew what they knew now when they listed – would they still have gone through the listing process. The unanimous opinion was that they would still want to be publicly quoted.
It was generally agreed that the markets are not functioning well; it is difficult for many companies to raise money; the costs are high and time spent on investor relations takes up about a third of senior management’s time. But these directors all acknowledged that public-company status brought distinct commercial advantages over staying private. The listed designation brings the advantage of a kite mark, an endorsement that a company is fit and proper, with published information for all to see. Customers, suppliers and other stakeholders do not have to make lengthy enquiries as to the probity and financial health of a company; so in tendering situations and contract negotiations listed status is a huge advantage.
A London listing in particular brings valuable prestige. One of our adviser members tells me of a non-UK corporate client that was able to borrow at lower bank rates immediately following its AIM flotation.
Having a share price also cuts short the debate on company value. A recent arrival to the stock market told me that his company had been trying to negotiate an acquisition for some years before going public. The deal had foundered on the relative values of the companies. Once listed this argument fell away and the company was able to issue shares as the currency for the deal. The director was adamant that the deal only happened because the company was listed.
So we should not forget the benefits that having a share price and a listing brings to a company. It’s too easy to dwell on the negatives and take the positives for granted.
We should all be doing more to promote the public equity markets as a key route to enable companies to raise money, grow, create jobs and add long-term value for shareholders.
Tim Ward is chief executive of the Quoted Companies Alliance. His past roles have included head of issuer services and head of marketing at the London Stock Exchange and finance director at FTSE, the index company.