Are you interested in investing in the stock market? If your answer is “yes”, you have probably come across the term “listing” more than once. Read ahead to learn the listing definition and get to know some practical insights about this concept.
What Is A Listing?
The term “listing” refers to the process of a company’s shares being formally admitted on a stock exchange, making them available for public trading. This procedure involves meeting certain regulatory requirements, such as issuing a prospectus, disclosing financial information, and complying with exchange rules.
What You Need To Know About Listing
Companies often list their shares as a means of raising capital and increasing their visibility in the market. When an organization decides to list its shares, it typically hires an investment bank or a financial institution to manage the process.
The bank or FI helps the company determine the best time for listing, the offering price, and the number of shares to be issued. As a rule of thumb, the hired entity also underwrites the offering, which means that it guarantees to buy any unsold shares.
There are two main listing types:
- Primary listing, aka initial public offering (IPO), which occurs when a company’s shares are listed on a stock exchange for the first time.
- Secondary listing, aka cross-listing, which is when a company that is already listed on one exchange decides to list its shares on another platform. This is often performed to increase a company’s visibility in international markets.
Listing the shares can increase a company’s profile, improve its liquidity, and provide access to a broader pool of potential investors. Furthermore, a listing can boost a company’s credibility, making it easier to raise capital in the future.
While there are benefits to listing a company’s shares, there are also risks associated with it. One of them is the possibility of the share prices being affected by a range of factors, including market conditions, company performance, and investor sentiment.
Another risk is the cost of the listing process, which can be significant, particularly for smaller companies.
