Yes of course you can – why ever not? IPOs are not only the domain for the gorillas out there and there is nothing stopping you from listing your company and offering investors free trading stock once you have the fundamentals of your business built on solid ground. You might want to float your company to get access to new capital or to give your early stage investors a potential return but whatever your motivations everything is possible and within your grasp with the right amount of planning and execution.
So lets make the following assumptions:
• You are (or will be soon) profitable and experiencing exponential business growth • You have cash in the bank to cover you for the next 18 months plus • You have additional capital to pay associated fees • You are well regulated and will pass most if not all regulatory due diligence • Your management team knows what they are doing
Given all the above there is little to stop you listing your company and making the shares available on a public exchange. So what is there to stop you? Very little except yourselves.
You will need to decide on which exchange to list your company, which doesn’t necessarily have to rely on where you are geographically based. For example a UK company can list on most overseas exchanges, including NASDAQ, if the rules are strictly adhered to. But is the Toronto Exchange a good fit if your business is not oil and gas, is Sydney any good is you are not a mining company. The biggest question is – will the chosen exchange provide my company with liquidity? That is to say the degree to which your company’s stock can be bought or sold in the market without affecting (adversely) the share price. It is often characterised by a high level of trading activity e.g. your shares can be easily bought or sold and are therefore liquid. Will there be enough buyers and sellers for my stock? When researching have a look at similar companies and check on the volume of shares that are being traded.
Do make sure you have a tight management team about you as this will be critical to how the world sees your viability as an investable asset. Take your time when recruiting Non Execs and Execs to make sure that you get the right ones and remember that there are plenty about only too willingly to accept the lure of free trading stock in return for their services. In fact the dos are all pretty obvious it’s the don’ts that need to be watched out for. As soon as ‘the market’ knows that your intention to list is firm you will be approached my what we fondly called the ‘Circle of BS’ and you will be a target for all sorts of snake oil salesmen including dodgy PR organisations, stock promoters and alternative funders. It will be very important that you get the correct sort of advice and guidance as the fees you will need to pay to the right ones will be pretty high. Even on AIM you are going to need a raft of advisors including a nomad, a broker, auditors, prospectus writers, reporting accountants, lawyers, registrars etc. etc. They will all want their pound of flesh. You have worked hard to build up your war chest – just make sure you get value for your investment. If you don’t need to raise money through the listing i.e. you just need an introduction to the exchange your fees will be very much reduced particularly as there will be no need for a prospectus. Sometimes just your intention to list will be a powerful incentive for investors to invest.
--When you finally get your balloon launched you will need to keep it there and that’s when the fun really starts. Its all very well to get a jump-start and to show a major price rise on say day 2 but keeping the momentum going can be pretty tough. My first IPO was characterised by a 20% rise in out first days trading but my chairman’s sage retort to my excitement was that if we were still doing the same in 12 months that we would really be passing the acid test. Just make sure that you have lots of ammo in the pipeline – new customer announcements and contract wins are just the ticket. You will also likely be the target of ‘shorters’ in early trading so ensure that you have plenty of firepower to match them. You will also need to keep your stock and options holding employees to ‘stick to the knitting’ because the only thing that will keep the stock rising is by keeping deliveries and sales moving.Employees high-fiving at every stock movement can be very distracting to the business.
Anyway if you ‘keep your head when all about you are losing theirs’ coupled with seemingly daily sisyphean effort there is no reason to prevent you successfully IPOing.
Good hunting – the Venture Pilot