Advantages and disadvantages of stock market

The benefits of stock market flotation could include: giving access to new capital to develop the business making it easier for you and other investors - including venture capitalists - to realise their investment allowing you to offer employees extra incentives by granting share options - this can encourage and motivate your employees to work towards long-term goals placing a value on your business increasing your public profile, and providing reassurance to your customers and suppliers allowing you to do business - eg acquisitions - by using quoted shares as currency creating a market for the company's shares However, you should also consider the following potential problems: Market fluctuations - your business may become vulnerable to market fluctuations beyond your control - including market sentiment, economic conditions or developments in your sector. Cost - the costs of flotation can be substantial and there are also ongoing costs of being a public company, such as higher professional fees. Responsibilities to shareholders - in return for their capital, you will have to consider shareholders' interests when running the company - which may differ from your own objectives. The need for transparancy - public companies must comply with a wide range of additional regulatory requirements and meet accepted standards of corporate governance including transparancy, and needing to make announcements about new developments. Demands on the management team - managers could be distracted from running the business during the flotation process and through needing to deal with investors afterwards. Investor relations - to maximise the benefits of being a public company and attract further investor interest in shares, you will need to keep investors informed. Employees may become demotivated - if shares are only offered to selected employees, there could be resentment. Shareholding employees could feel that there is little left to work for if they are sitting on valuable shares.