Question

discuss the benefits and drawbacks to the shareholders of a company, of a public listing on a stock exchange compared to private equity finance as a way of disposing their shares

Answer 1

Benefits:

It increases the company's ability to raise capital quickly by reaching a large number of investors.

Company shares in the form of stock options can be offered to employees and contractors as an essential form of incentive compensation.

When a company enters into a merger or acquisition agreement with smaller companies, the terms of the contract usually include stocks. This way, small business cash flow becomes smooth and efficient.

It generates a lot of liquidity and capital that can be used for a better future of business. Thus, the company will be in a more stable financial position to apply for loans or to negotiate the terms of the loans.

The company gets more visibility and credibility.

Disadvantages:

When a company goes public, management loses part of its freedom of action in certain areas without the approval of the board of directors and the majority of shareholders.

The cost of going public is significant, in the form of subscription commissions and fees, legal and accounting fees, printing fees, and registration fees.

When a company goes public, the company must constantly disclose confidential information, including business strategies, financial results, executive salaries, and compensation agreements to regulators.

Public company has ongoing costs for regular reports and power of attorney that is submitted to the regulatory authorities and distributed to shareholders.

Company control and management positions can be removed from existing management if group of investors gains majority control