- Raise Equity in the Capital Market
- Stock Markets to Float Your Company
- Companies from the United States
- Issue Debt to Raise Capital
- Recommended Corporate Structures
- Investment Documents
Taking a company from private to public is a big and potentially rewarding step that provides access to significant amounts of capital and increased prestige and publicity. Choosing whether to float is probably one of the most important decisions a private company will make.
While most enterprises opt for an initial public offering (IPO), it is not the only way to raise funds in the capital market with your business. As a London-based firm of capital market specialists, we’ll advise you on the most appropriate route for your situation and aspirations. And drawing on our expertise and experience, we can make the process easier.
A direct listing (also known as a direct public offering) is an alternative way for companies to go public. Here, the company raises equity through private placements and later on it gives those early private placement investors the opportunity of selling their shares on the stock exchange. The shares are sold directly to the public without the help of intermediaries. The process cuts out underwriters and their fees and is cheaper and quicker than a traditional IPO. No new shares are issued, and there is no lock-up period. The company does raise funds through the listing but gives investors the opportunity to cash in.
In an initial public offering (IPO), a privately owned company lists its shares on a public stock exchange for the first time, making them available for purchase by the general public. IPOs create new shares to generate extra funds, which can be used to support growth, pay off debt or fund research and development. One of the key components of an IPO is that an intermediary, usually an investment bank, underwrites the shares and helps set the initial share price.
Cash shells are non-operating public companies with a stock market listing but zero assets. Usually, cash shells are created for the sole purpose of selling the company later on for reverse merger purposes. They attract small caps looking for funds and a stock market listing without having to go through a full IPO process which can be time-consuming and expensive.
A convertible bond is a fixed income hybrid security sold by public companies that can be converted into shares. Using convertible bonds, an issuing company can raise funds for expansion at lower interest rates than corporate bonds. Selling bonds is also a compelling option for small caps that don’t want to lose voting control of their business. However, this benefit is usually temporary since bonds convert to shares, so eventually, shareholders are entitled to vote for directors.
Special purpose acquisition companies (SPACs) are non-operating publicly-listed firms created with the sole purpose of raising capital to acquire and therefore bring to market a private operating company. SPAC acquisitions are attractive to small caps because they can become listed companies without executing an IPO. The SPAC is already a public company. Taking the SPAC route can offer the target company owners a faster path to a stock exchange listing than an IPO.
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds. Interested investors can buy into the offering and receive a new cryptocurrency token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project.
IPOs (initial public offerings) and direct listings are two ways for private companies to go public by listing shares on a stock exchange. However, there are key differences between the two. The majority of companies go down the IPO route in which new shares are created and underwritten. With a direct listing, employers and investors sell their existing shares, and there is no underwriting. Also, a direct listing doesn’t have a lock-up period that applies to IPOs.
Purchasing a cash shell, an already listed company is a quicker and cheaper alternative to the lengthy IPO process. However, it involves risks and uncertainties. Investors don’t control all the outstanding shares, and there can be short-term share price volatility if shareholders offload their shares as soon as the company goes public. One of the biggest risks is that of hidden liabilities. A cash shell may have debts and liabilities that are not discovered until after the acquisition.