If your company has enjoyed a good deal of success, you and your management team are likely looking to take your operations to the next level. For other organizations in the same position, going public has been the logical next step in their progression. Taking your company public is an obvious sign of its health and prosperity, yet it isn’t a process that occurs easily. If your organization is at the point of beginning discussions on the possibility of issuing an initial public offering, it’s important that you understand the different markets out there and their listing requirements.
The Pros and Cons of Being Publicly-Traded
Before you even begin to consider the validity of taking your company public, you should first consider the pros and cons of such a decision, and if the ultimate benefit is worth the challenges that you and your organization are bound to face. Going public through a traditional IPO can be a very complex process, often taking more than a year to complete. Once your stock hits the market, you’ll then be faced with becoming acclimated to the strict oversight standards and reporting requirements required of publicly-traded entities. Getting your organization up to speed and remaining compliant with these standards may come at high cost.
However, the potential benefits that come from being a publicly-traded company will often more than offset these costs. Through an IPO, you may be able to infuse a significant amount of capital into your organization in a short time. As a public entity, you’re able to offer stock options as benefits to lure in new employees whose contributions could add a great deal of value to your organization. Then there’s the prestige of simply being listed on a stock exchange. Seeing your organization’s name listed in a major market helps establish brand credibility in the eyes of both customers and potential investors.
Qualifying for a Market Listing
If after weighing the advantages and disadvantages, your organization is set on going forward with your IPO, your next step is to review the listing requirements for the major stock markets through which you wish to offer your shares. The three largest markets are the New York Stock Exchange, the NASDAQ National Market, and the American Stock Exchange. While each considers many of the same factors in determining your eligibility to be listed, each also varies slightly in their exact requirements. These factors include:
- Initial minimum bid price: NASDAQ requires an initial minimum bid price of $4.00 to be listed on its SmallCap Market, and $5.00 to be listed on the National Market. The initial minimum bid for the NYSE is $4.00, and $3.00 for AMEX.
- Public float: The market value of your company’s public float represents the portions of shares available to the general public upon your initial listing. To meet listing requirements, yours must have a value of $8 million to be listed on NASDAQ, or $3 million to be listed on either AMEX or the NYSE.
- Pre-tax income: All three major markets require a minimum pre-tax income to be considered for listing. For the NYSE and AMEX, that amount is $750,000. For NADDAQ, it’s $1 million.
Each market also has its own unique listing requirements, as well. For example, both NASDAQ and the NYSE require that your company has a minimum for 400 shareholders to be considered, while AMEX does not. Each also offers alternate listing criteria if your company does not meet their quantitative requirements. These are typically based off factors such as your total assets or revenues, or your market capitalization.
Taking your company public could potentially net outstanding short- and long-term gains. However, given the complexity of the process, it’s vital that you understand all of the different market listing requirements before even considering an IPO. If your organization already meets all of them, then you have the benefit of selecting the market that offers the greatest advantage to you. If you don’t happen to meet any of them, then you now have tangible goals to achieve so your organization can take this step in the future.
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