What are the benefits of listing on a stock exchange?

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The benefits of a stock exchange listing go beyond just accessing capital and include demonstrable adherence to recognised standards of transparency and governance, says Institute of Directors Member Carolyn Gelling, Head of the Isle of Man Office at The International Stock Exchange Group (TISEG).

There are numerous reasons why business owners and company directors may consider it beneficial to list their company on a stock exchange.

These reasons might include one or more of the following: enhanced prestige and profile for the owners and their business; access to a new pool of capital which will help to take the company to the next stage of its development; a clearly defined price for the shares and a valuation of the business; provision of a stepping stone to another major global exchange; and a route to exit.

However, a stock exchange listing also provides demonstrable adherence to well recognised standards of transparency and governance.

Transparency & governance

Companies wishing to list and to continue to be listed must adhere to the listing rules of a stock exchange and for many exchanges is carried out in conjunction with a listing sponsor, which must be appointed at all times.  

The sponsor is responsible for helping the company with the listing application process, which includes demonstrating that the company meets the minimum conditions of listing, completion of the listing document, disclosure requirements and responsibility statements.

Whilst rules and levels of oversight vary between exchange, in our case, TISE’s own market authority assesses a company’s suitability for listing and carries out ongoing surveillance to protect the integrity of the market.

The sponsor is also required to assist the company in meeting its continuing obligations post listing, including notifications to the market and the preparation of audited financial statements generally to internationally recognised standards (e.g. IFRS, UK GAAP, US GAAP) depending upon the rules of an individual exchange.

The audit provides third party scrutiny and review of the financial position of the company which allows investors and the wider public to be able to make an evaluation of the performance of the company and in particular, in comparison to the objectives outlined in the listing document.

Accessing capital

Transparency and good corporate governance can make investment in listed companies more attractive to many stakeholders, from suppliers, to employees and particularly for investors.

Indeed, some investors can only invest, or have to invest a certain proportion of assets, in listed products because they know that the company in which they are investing is adhering to specified standards of transparency and governance.

It is these requirements which mean that owners need to have given thought to whether or not they see an exchange listing playing a part in the development of their business well before they actually reach that stage.

By giving this consideration early in the company’s life, business owners and company directors can start to make the necessary preparations for an exchange listing so that they are in the best possible position to meet the required conditions at the time they wish to be admitted.

TISE

Isle of Man companies might choose to list on TISE because it offers the advantage of being able to facilitate the listing directly from the island. In addition, TISE also has a fee regime and admissions criteria which are better suited to meeting the needs of growing businesses than those of some larger exchanges.  

In fact, a company may use a TISE listing as a way to raise its visibility and get comfortable with the requirements of being a listed company and then, once it has grown, transition to being listed on a major global exchange. In this way, TISE might be considered an ‘incubator exchange’ or a ‘stepping stone’.

For many businesses that is likely to be a longer term objective but in the meantime, they should still ensure that they are adequately planning for the future and as part of that, consider how an exchange listing could aid their ambitions.

Carolyn Gellin, Head of the Isle of Man Office of The International Stock Exchange Group

Organisations such as The International Stock Exchange provide both Isle of Man and relocating businesses a stepping stone to accelerated growth and enhanced prestige. The Exchange plays a significant and unique role within the Isle of Man eco-system, acting as a facilitator and platform for businesses looking to demonstrate adherence to world renowned standards of governance and transparency.

Michael Crowe, Chief Executive of Finance Isle of Man

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