I just wanted to get some opinions on the benefits and drawbacks of listing my company on the stock market. Haven't done it before and i'm interested in getting some views from some of you that may have experienced the whole thing already.
I'm guessing the primary objective is to get some investors investing capital into your company, but I want to know if it goes further than that.
It does go a lot further. Here are some general pros/cons:
* You can get a lot of capital (money) real quick. Putting your company into IPO will gain you $100 per subscribed share.
* You funnel money back to your holding company so you can expand with more subsidiaries.
* It can be a quick source of cash if you need it (selling off stock).
* Can be a good, strong way to raise your holding company's equity to be able to do other things (lease out planes, buy into other IPOs, etc).
* You have to pay out 15% of your weekly profit as dividends. Though nominally, 12% goes back to your holding and 3% gets divided up among those that gave you money in your IPO.
* You could lose control of your company if you're not careful. Through bad planning, you could lose the "main shareholder" title to another company, at which point you lose control of your company, and they take it over. Note that I have seen some people that do this on purpose. They create a company, build it up, then sell it off. Interesting way to play.
* You divulge the contents of your Facts and Figures page to your shareholders, which can sometimes (and usually) mean your direct competitors, if they are smart.
* You lose the ability to transfer aircraft without compensation. This can be used as a tool to funnel money from one company into another, but if one company is listed on the stock market, this option disappears.
I'm sure there are others, I just can't think of them all.
Also you can't just close your airline and get the money back....once it's on the stock market, the only way to make it go away is bankruptcy.
What a waste of money ;)
and since the stock price is linearly linked to the value, there is no speculation going on.
and the "quick source of money" only works if you find people willing to buy your shares off you.
I really don't see the point in trading on the stock market the way it is these days.
I also think, the cons outweight the pros by far.
Well it really depends on the situation. For me I always saw more cons than pros in IPO and stock market, however then my competitor fell and I needed cash to expand and occupy slots IPO helped me a lot. I raised 50+ millions and was able to expand quickly before new entrants into my market.
if your airline is worth 20 million, you will cash in 5 million if people subscribe 100% of the shares. Five million equals the profit you make in what... three weeks ?
Obviously, if your 20 million airline makes a profit of 200.000 dollar per week, the extra five million will give you a strong boost. But who would invest in an airline that makes no profit ? Your friends and players with too much money.
Or you could push players to buy shares. If 200% of the shares are sold, you will cash in 10 million. But then the investors will have paid 200 dollar for a share that is actually worth 100 dollar.
You loose the possibility/flexibility to move planes from one subsidiary to another. All in all, I prefer not to take my airlines to the stock market.
Thanks for your insights guys.
What about if I want to sell stock. I assume the money will go to my holding company… How would I be able to transfert that money to my subsidiary and be able to use it to grow more?
You can't. As soon as your subsidary is listed on the stock market you cannot freely transfer assets (and ergo cash) from holding to sub
also, keep in mind, that you can only sell shares if there is someone to buy them.