Cost-Benefit Analysis:
Benefits of Going Public:
The main benefits of going public are:
1. Continuous access to capital markets.
2. Major cash inflow resulting from the flotation can be used to fund the company’s future expansion.
3. Tax benefits for both the company and its shareholders.
4. Future acquisitions can be made easier, i.e. via share-for-share exchange consideration.
5. Creation of an exit route for shareholders.
6. Value added to the company.
7. Credibility and image enhancement for the company.
Costs of Going Public:
The main costs (expenses) associated with the listing procedure include the following:
|
Fees |
Description |
| 1. Underwriting fees | A company that seeks listing is obliged by the Stock Exchange to have its issue to the Public underwritten. The fee is calculated as a percentage of the value of shares that will be underwritten. |
| 2. Selling fees | Fees payable to the various institutions that well the company’s shares. The fee is calculated as a percentage of the value of shares that will be sold by the institutions. |
| 3. Management fees | Fees payable to the managers of the issue for the administration of the entire procedure. The fee is calculated as a percentage of the value of shares that will be offered to the public. |
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