Listed

Listed company is the one that has gone through the process of adding security to trading on a particular exchange. 

Listed explained

Listing means adding company shares to the list of assets that can be purchased on the exchange. The procedure and requirements for securities depend on both the individual floor and the type of asset. But there are general steps and conditions, as well as the legal framework that governs the process.

It is important to understand that listing does not automatically mean new securities are issued. It is just the "enrollment" of assets in the lists of those sold at a particular exchange.

Goals and objectives of Listed

For a company to list its securities for sale on the stock exchange is an effective step to attract capital and private investors to the business. But it is important for the stock exchange itself to admit only those issuers in whose integrity it is confident. This is precisely the purpose of the listing procedure.

Its main tasks are:

• developing and maintaining a uniform standard for issuers and securities;
• creating a safe trading environment for investors and issuers alike;
• clarifying the reliability of a security;
• forming a reputational framework for issuers.

Since the securities market is a fluid system, admission to trading alone is not enough to ensure sufficient transparency and level of trust in the platform. An exchange can initiate transformation into a delisted company, which is necessary if the securities demonstrate low demand or the issuer ceases to meet the criteria.

Pluses and minuses of being Listed

When going public, a company must understand that there are not only upsides to becoming listed, but also downsides.

The advantages of being listed are:

• the opportunity to raise additional capital to enlarge the business;
• reputational advantages;
• potential tax benefits;
• the emergence of high liquidity for shares.

However, it is worth noting the disadvantages for the company to be listed:

• The high cost of the listed process itself and the associated costs.
• Requirement for complete transparency of a company's financial statements.
• Reputational risks in the case of transforming into a delisted one or failure to list and getting on the pre-listed list.
• Possible loss of management focus when it is required to prepare the company's documents and organization for becoming listed.

Listed companies classification

IPO (initial public offering). The most well-known and popular type of listed company. It is when a company goes public for the first time in order to raise funds for development, for which purpose it issues new shares. As a result the stakes of previous shareholders are diluted in the interest of the new owners, and the company receives money for development. It is for the latter reason IPO is so important in the eyes of investors, regulators and society as a whole.

All the work to prepare and conduct the IPO management is done under the guidance of underwriters - as a rule, they are specialists of well-known international investment banks with relevant experience. And here, reputation and credibility are of paramount importance, because it is the underwriters who introduce investors to shareholders.

The IPO is one of the most expensive listed procedures because it implies a lot of preparatory work: all the company's business processes are put in "order" for their compliance with the strictest corporate governance practices. The company must have IFRS statements for a certain period, all internal and external conflicts must be resolved - in a word, no skeletons in the closet.

The underwriters help to draw up an application, which is sent to the regulator and the stock exchange. The underwriters send another document - the investment memorandum (prospectus) - directly to investors. In this memorandum organizers of the IPO directly address potential investors with a description of the company and its past performance, shareholders, financial and operating performance and forecasts for the foreseeable future. A critical section of the memorandum is a list of potential risks. Traditionally, organizers have included in this section all of the potential threats to the company's growth and ability to generate cash flow. It should be noted that even those risks which are unlikely to occur, or are close to zero, are considered as possible risks. But this is tradition.

Finally, an important stage in the process of a company becoming listed is the direct meetings with potential investors. We are talking about road shows, during which investors get answers to their questions and, as a result of cooperation with investors, the issuer itself often changes the initial configuration of the IPO, including the amount of placement and the price.

SPO (secondary public offering). It may happen that after some time, the shareholders decide to conduct a secondary public offering. Often, the SPO is carried out for the benefit of a narrow circle of investors or even for one, strategic, investor. SPO is logically a less expensive procedure, since most of the work had already been carried out during the IPO.

DLP (direct listing process). Less expensive type of listed organization establishment. Unlike IPO, in the DLP process, the shareholders sell their shares rather than new shares and the number of intermediaries in the process is minimized. No new capital is raised in the DLP process - the shareholders are essentially sharing part of their existing business with new investors or exiting the business entirely. Shareholders are sometimes said to be cashing out. In the case of DLP, there are a number of requirements inherent in an IPO. For example, there is no moratorium on the sale of securities by the underwriters within a certain period.

SPAC (special purpose acquisition company) or quasi-placement. A specific type of listed etnerprise with few caveats. A SPAC is a company with zero assets that lists and raises funds from investors for future acquisitions. Of course, for investors to believe in such a "zero-asset" company, it must be led by a well-known and experienced person. The goal of SPAC is to find a potential private company to take over. Subsequently, SPAC shares are exchanged for shares in a private company with certain terms and ratios.

Cross listed. A type of listing where shares are listed simultaneously or sequentially on multiple exchanges.

Depository listed. Shareholders do not receive the shares themselves but rather depositary receipts guaranteed by an international depositary bank authorized specifically for this purpose. One receipt can be equivalent to several shares (fractional shares).