Syndicate
Diversifying of Funding Sources
For companies, quoting in the stock market supposes important advantages among which we should highlight the following:
- Diversifying of funding sources.
- Obtaining funds at a lower cost, since funding through the stock market is normally cheaper than those from other places.
Capital negotiated in the stock market is divided among many stockholders which could reduce the possibilities of a small group to control the company. Anyways, these possibilities are inexistent and sometimes the founders of companies can lose control of the company as a consequence of another company buying a large amount or the majority of stocks through the stock market.
The securities issued by the companies are more liquid since investors can resell in the stock market when they wish.
It betters the public image of the company because of the continuous and free advertising that appears in the media, showing the performance of the stock market.
One can always know exactly the value in the market of the stocks issued by the company. This circumstance is not possible for companies not quoted in the stock market.
The funding amount to get is much larger than the one you could get if the company were not quoted in the stock market.
The securities quoted in the market have many fiscal benefits in determined times.
The information requirements that companies must follow when quoted in the stock market allow them to have at their disposal much more information about these companies.
The increasing information provided by companies quoted in the stock market is an incentive for a greater professionalism management.
We can broaden the range of incentives for employees through the companies stock options. If the company quotes in the stock market, the company can disinvest from the stocks which were previously bought.
However, stock markets quote can have some disadvantages for certain companies:
The issuance of stocks that quote in the stock market can be thought of as a loss of power in the company for the stock founders.
Stocks that are quoted in the market can become property of unknown people to the stock founders.
Companies that quote are forced to facilitate periodical information to their stockholders and the market.
Companies that quote in the market are required to accept external audits.
The more transparent the companies that quote in the market make them be controlled easier.
On the other hand, stock market quoting demands the company to be the most professional possible in its management, as a consequence of the existing controls and the required information transparency.
We should add that to most companies conditions demanded to quote in the market are insurmountable.