Listing – the primary and secondary market

Stock Exchanges

Listing – the primary and secondary market

PRIMARY MARKET
SECONDARY
MARKET
Also known as:
Becoming listed or quoted
Floating on the stock market
Going public
Making and Initial Public Offering (IPO)
INVESTORS
A company that has been in existence for sometime, looking to expand
A company that has already been listed
iCompany sells shares to investors for the first time
Investors will at some point wish to dispose of some or all of their shares and will generally do this through the stock exchange trading system.
Referred to as ‘Dealing’

Listing – Advantages and disadvantages

Advantages
Disadvantages
Capital – IPOs help to raise capital and, once listed, further offers of shares are much easier to make. It also offers an exit route for the company’s original founders - convert their shareholdings and hard work into cash
Takeovers – a listed company could use its shares as payment to acquire the shares of other companies as part of an acquisition.
Status –being listed should help the business in marketing itself to customers, suppliers and potential employees.
Employees – Can offer key employees the option to buy shares (often term stock or share options) provides incentives and retaining employees
Regulations – A listed company would have to govern itself in a more open way e.g. provide detailed and timely information on the company’s financial situation and progress
Takeovers – More at risk of being taken over if another company can convince the public shareholders to sell to them
Short-termism – shareholders of listed companies tend to exert pressure on the company to reach short-term goals e.g. increasing profits every year, rather than being more patient and looking for longer-term investment and growth.