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The flotation in the stock market usually comes with a lot of advantages that business owners can benefit from. Some of these advantages include the fact that it creates a favorable market avenue for the sale of the company’s shares, provides a means for company owners to provide more incentives for employees through the creation of more share options, creates good opportunities for company owners, and affords company owners the opportunity to do business through the use of quoted shares as currencies.
Whenever there is flotation in the stock market, it is capable of increasing the public profile of a company. Apart from the fact that your company will become more popular, flotation can also serve to build the confidence and trust that your customers and suppliers bear towards your company.
Notwithstanding all these advantages, flotation in the stock market is also capable of bringing along with it certain disadvantages and drawbacks as well. Some of the disadvantages that could result from flotation include the following:
- Stock market flotation usually results in fluctuations in the financial market. When this happens, the susceptibility of a company’s business to this fluctuation could become too difficult for the owner to control and manage effectively.
- Flotation of the stock market means more responsibilities for shareholders. While flotation does bring about more publicity for a company, and thus more shareholders, they in turn will lose the liberty of carrying out plans for the company according to their initial objectives and goals.The company will also have to always consider the interests of its shareholders before embarking on any set objectives.
- Even though it is to the company’s advantage to attain a public profile, with it also comes the problem of ensuring to comply with laid down rules and regulations. Not only that, they will also need to attain certain standards set for corporate governance, such as maintaining transparency and the likes.
- Stock market flotation means more interactions between investors and management. While your company’s publicity brings you more benefits by drawing the attention of more investors, such that more of the company’s shares are sold, to keep the relationship between the company and its investors smooth, the management must take up an additional task. They must ensure that all their investors are well-informed and duly updated on happenings within the company.
As can clearly be seen, while there are many advantages to gain from stock market flotation, there are also lots of drawbacks involved in it. Therefore, it is always wise and advisable to consider, as well as weigh both sides before taking a leap into the decision to take advantage of a flotation situation in the stock market.
