: A MODERN APPROACH TO FINANCING GROWTH
Selling equity to the public is one relatively inexpensive way for a company to finance expansion and development. This process is referred to as "going public." It is a viable alternative that is easier and less expensive than many business owners realise. By going public, the firm is transformed from a private company owned by a few people, to a public company owned by a larger pool of investors. A firm that goes public and lists on the ECSE can benefit from the following significant advantages:
1. Raising Permanent Capital
When an enterprise goes public, it does not have to pay interest on the funds generated from the sale of its shares, nor does it have to repay the investment as it would if it borrowed the funds from a bank. The investment represents a permanent form of capital available to the company. Management may pay dividends to shareholders if and when the company makes a profit. As the permanent capital increases, the company's capacity to borrow from banks improves, further expanding access to funds.
2. Increased Liquidity
When a company lists on the ECSE, its securities are continuously evaluated in the marketplace. The price of the shares is determined by supply and demand. The ECSE, by providing a centralised market, can improve the liquidity of the shares held by investors. This enables shareholders to buy and sell their shares quickly and easily.
3. Greater Flexibility
A publicly traded company listed on the ECSE would have greater access to resources and flexibility to diversify more easily into new or related businesses. Being a public company listed on the ECSE also reduces the costs of issuing subsequent equity for trading.
4. Access to a Larger Pool of Capital
In the past, many public companies that wanted to raise capital by share offerings were often limited to investors in their own island market. Companies trading on the ECSE have access to a larger pool of capital and technology from the entire ECCB currency area, as well as from overseas.
5. Recognition for High Standards
Companies listing on the ECSE must comply with the rules for disclosure and financial reporting requirements of the ECSE in accordance with the Securities Act, uniform regional legislation governing securities market actvities. By doing so, the level of trust and confidence in a company is raised among existing and potential shareholders, as well as customers.
6. Prestige and Brand Recognition
Listing a company on the exchange generates media interest and creates wider public awareness of the firm. This exposure raises its profile in the regional and international business community and lends prestige to the firm.