There can be many reasons for the shortened life of a company.
Some collapse when they can no longer source enough funding to expand or support their business.
Some can be overly dependent on the owner – even one with a great business mind – and lack new ideas and strategies from other experienced businesspeople, while others can struggle to attract high quality human resources.
Such problems get harder to deal with when a business expands to compete in a tough environment.
To cope with such challenges, one viable option is to go for an initial public offering (IPO).
Exposure to new funding sources
Companies can access new sources of funding through an IPO.
Funds are normally raised through relatives, friends, banks, private investors or private equity funds. However, this may only provide just enough funds for the early expansion of the business.
To grow more and compete in a competitive market as the company gets bigger, getting money from the public may be the only possible way.
That’s where IPOs come into play.
Companies that have been through an IPO and listed on the stock exchange can have the option of raising money from the public not only once.
They can do this many times through additional offerings as long as their business continues to show great results and can convince investors.
Strong corporate governance
Strong corporate governance is one of the qualities of a listed company.
By having a proper board of directors and relevant committees, companies can decide on issues in a more sophisticated way, rather than by making decisions based on one person’s opinion.
Strong corporate governance will also help the company attract more investors, promote accountability and mitigate risks, as well as ensure the compliance and corporate efficiency of the business.
By listing on the stock exchange, companies are required to have effective corporate governance that is compliant with a strong set of rules and regulations from the authorities.
With this, every move the company makes will be based on the firm’s best interests to ensure its longevity.
Woo strategic investors
In addition to having a reliable structure and trusted corporate governance, a listed company will be more attractive to strategic shareholders than one that is private.
Having an edge by being transparent and financially sound, strategic investors, usually other companies with greater experience in a comparable sector, will be likely to invest in the business.
These investors will use their experience and expertise to improve the company so it will be able to keep pace with the competition, as well as be able to dominate the market resulting from this expertise and improved technology.
Attract quality human resources
High quality human resources are crucial to a company moving forward.
A successful company is one that not only has strong management and strategies in place, but is also able to attract more highly qualified employees.
While some private companies aren’t attractive enough to do that, listed companies don’t usually struggle to get strong human resources.
A listed company is usually more financially stable and equipped with a strong structure making it a very attractive environment for employees.
Listed companies can potentially retain staff longer than non-listed companies with an employee share scheme allowing the employee to be part of the firm they work for.
With this ability to attract and retain highly qualified staff, a company will become more stable and operate in more effective and innovative ways.
Establishing and growing a company shouldn’t be based only on short-term financial benefits.
Business owners should also pay greater attention to the longevity of the company – and by going for IPOs, companies will be better equipped with improved management structure, strategic partners and highly qualified human resources, as well as access to funding.
Launching an IPO isn’t just a choice, but a necessity for a company should it aim to exist and dominate the market for a long period of time.
Contributed by: The Cambodia Securities Exchange, Listing and Disclosure Department.
Email: [email protected]
Tel: 023 95 88 88 023 95 88 85
The Cambodia Securities Exchange is the first securities market in the Kingdom.
Disclaimer: This article has been compiled solely for informative and educational purposes. It is not intended to offer any recommendations or act as investment advice. The Cambodia Securities Exchange is not liable for any losses or damages caused by using it in such a way.