Company law by Gabriele Giambrone
Floating a company, otherwise referred to as going public, is a legal procedure though which a company in the UK changes from being privately held, to being publicly held. This process results in a percentage of the company’s shares being offered for sale to bidders within the public domain. These shares, Gabriele Giambrone says, are made available on the stock exchange. The selling of stock which was once privately held is known as IPO, or the Initial Public Offering. In the UK, there are three types of investment markets which a company has can choose to sell its shares on; these, Gabriele Giambrone says, include the OFEX, the AIM (Alternative Investment Market) and the Official List on the London Stock Exchange.
The decision to do this has to be considered very carefully, from both a legal and a business perspective. The process of floatation, according to Gabriele Giambrone, is a costly and complicated process which in order to be successful, will require independent financial and legal council to be appointed. In terms of why a company would choose to go public, there are many reasons.
For some, it is to raise capital; returns are generated for the owners that have provided the initial capital. If the company is about to go into liquidation, it may choose to float itself, so as to pay back its investors. Going public not only raises capital, but can make alternative sources of money available too; for example, the public debts markets are more easily access to public companies that they are to private.
Switching from being privately to publically held is also an excellent way in which to entice sought-after professional candidates to senior managerial positions, through equity based incentives such as stock bonuses and stock options. In addition to this, publically held companies tend to garner more positive press coverage, with increased public visibility, and there is a certain prestige, Gabriele Giambrone adds, to being named as a publically listed company, as these businesses are deemed to be more secure and powerful.