Raising Capital Through Share Floatation
Corporate finance
Directors’ Briefing
Floating your company Floating your company can be one of the most exciting experiences in your business life. But it can also be stressful, time-consuming and expensive.
While taking professional advice is essential, it helps if you understand the basics.
This briefing outlines:
• Why you might want to float.
• Which market you should choose.
• How to manage the flotation process.
1 Why float?
future capital.
1.4 A float provides a market valuation for the company’s shares.
• An initial float, offering a small percentage of the company’s equity, may make it easier to sell further shares in the future.
• Key employees can see the value of shares or share options which they have been (or will be) granted.
1.5 A float can allow a company to use its shares as an acquisition currency.
• It may be possible to fund future acquisitions entirely or partly in shares.
1.1 A float can provide an exit for existing investors who sell their shares as part of it.
• Venture capitalists may want to realise their investment once the business has become more established.
• A founder may want to realise part or all of the value built up in the business.
1.2 A float can be used to raise capital for the company. New shares are often issued as part of the flotation.
• This can be the best form of financing for companies with volatile or low cashflow, or which already have substantial borrowings.
1.3 A float provides a mechanism for investors to trade shares.
• Shares which can be traded are more attractive to investors.
• The company’s shareholder base can be widened, increasing the potential for raising
England
Reviewed 01/04/14
Directors’ Briefing
1.6 A float helps increase a company’s public profile and raises its status with customers and suppliers.
2
2 Why not?
• Shareholders may want you to become involved in ventures, rather than the opportunities you
Directors’ Briefing
Floating your company Floating your company can be one of the most exciting experiences in your business life. But it can also be stressful, time-consuming and expensive.
While taking professional advice is essential, it helps if you understand the basics.
This briefing outlines:
• Why you might want to float.
• Which market you should choose.
• How to manage the flotation process.
1 Why float?
future capital.
1.4 A float provides a market valuation for the company’s shares.
• An initial float, offering a small percentage of the company’s equity, may make it easier to sell further shares in the future.
• Key employees can see the value of shares or share options which they have been (or will be) granted.
1.5 A float can allow a company to use its shares as an acquisition currency.
• It may be possible to fund future acquisitions entirely or partly in shares.
1.1 A float can provide an exit for existing investors who sell their shares as part of it.
• Venture capitalists may want to realise their investment once the business has become more established.
• A founder may want to realise part or all of the value built up in the business.
1.2 A float can be used to raise capital for the company. New shares are often issued as part of the flotation.
• This can be the best form of financing for companies with volatile or low cashflow, or which already have substantial borrowings.
1.3 A float provides a mechanism for investors to trade shares.
• Shares which can be traded are more attractive to investors.
• The company’s shareholder base can be widened, increasing the potential for raising
England
Reviewed 01/04/14
Directors’ Briefing
1.6 A float helps increase a company’s public profile and raises its status with customers and suppliers.
2
2 Why not?
• Shareholders may want you to become involved in ventures, rather than the opportunities you