This post is also available in: 繁體中文 (Chinese (Traditional)) 简体中文 (Chinese (Simplified))

If You Can’t Decide Whether Going for Public Listing in Hong Kong Is for You or Not, Read Our Article Below

Many big corporations that you see today were once smaller, private companies. There are plenty of reasons why a company goes public, including to expand and grow their organization. Although there are many great benefits, the going public comes with its own sets of drawbacks. Understanding the pros and cons of a publicly listed company can help you make better decisions for your company. See more below on Going for Public Listing in Hong Kong.

In Hong Kong, the main exchange market is the Stock Exchange of Hong Kong, more commonly known as SHEK. Currently, it is reported to be the fasted growing stock market in Asia. The independent body regulates the SHEK, Securities and Futures Commission (SFC) to ensure the companies are compliant with the law and as well as to maintain transparency and fairness in the market.

 

Why Do Companies Go Public?

Going public refers to the act of private companies who transition to become public companies. Once a company decides to go public, it will need to prepare for the Initial Public Offering (IPO) to open up and sell its stocks and shares. However, long before the IPO, the company must first find a suitable investment bank to help them delegate stocks, find potential buyers and investors, provide underwriting services and financial advice.

After becoming a publicly listed company, stocks and shares are sold to the public on the exchange market, making them shareholders and part owners of the company. Most companies that become public listed companies are capital-intensive based, such as telecommunication and airline companies. Companies like these require massive capital to run and operate; therefore, they rely on the public for funds.

 

To Go Public, or Not to Go Public?

Switching from being a private company to become a public listed company is a huge decision. If you are not too sure about going public, check out our list of pros and cons of becoming a public listed company below.

The Pros:

• Amass capital quickly.
  The main reason most companies switch to the public is to gain capital in a short amount of time. When the company is opening to the public, it will have a bigger pool of investors and buyers, contributing to the company’s value and its funds.
• Popularity.
  Public companies attract the attention of the public and media alike. The companies’ free publicity increases the awareness of their existence; this will all the more attract the attention of interested parties if the company is listed on a stock exchange. Not to mention, the exposure will enlarge the customer base too.
• Opportunities to expand.
  When a company becomes more stable with its financial abilities, it will have the opportunity to grow and expand. Capital expenditure can lead to repaid debts, new projects to be pursued, and new ideas to be explored.

The Cons:

• Strict reporting requirements.
  Having a public listed company requires you to be compliant with the International Reporting Financial Standards (IRFS). IRFS is a global accounting standard designed to provide investors and customers clarity and transparency of the company.
• Loss of controlling powers.
  The majority of decision-making and controlling powers lies with the Board of Directors. The original owners of the company will have powers, however, to a certain extent only.
• Loss of privacy.
  A public listed company is what it is – public. The company’s financial reports must be sent to regulatory bodies periodically, which may contain sensitive information. These financial data and reports are accessible to the public. Given how this information is easily found and obtained, public companies are often subjected to scrutinization by the media and analysts.

 

The Bottom Line

Deciding whether or not to go public is not a decision you make overnight. If you need more clarification on what it takes to go public and what comes after it, do not hesitate to speak to a professional. An experienced accountant can assess your company and help you make a better, informed decision.