Until recently, the ultimate goal for an entrepreneur used to be to get his or her company listed on a reputed stock exchange such as the New York Stock Exchange (NYSE) or Nasdaq, due to the fact of the obvious Pros, which include:

– An exchange listing means ready liquidity for shares held by the company’s shareholders.
– It enables the company to raise additional capital by means of issuing more shares.
– Having publicly traded shares makes it easier to set up stock options plans that are essential to appeal to talented employees.
– Listed companies have higher visibility in the marketplace; analyst coverage and demand from institutional investors can drive up the share price.
– Listed shares can be used as currency by the company to make acquisitions in which part or all of the consideration is paid in stock.

These benefits mean that most large companies are public rather than private; very large private businesses such as F&B and agriculture massive Cargill, industrial conglomerate Koch Industries, and DIY furniture retailer Ikea are among the world’s most valuable private companies, and they are the exception rather than the norm.
Problems of Stock Exchange Listing

But there are some dcons to being listed on a stock exchange, such as:

– Significant costs associated with listing on an exchange, such as listing fees and higher costs related with compliance and reporting.
– Burdensome regulations, which might also constrict a company’s capacity to do business.
– The short-term focus of most investors, which forces businesses to attempt and beat their quarterly revenue estimates instead than taking a long-term approach to their corporate strategy.

Many large startups (also known as “unicorns” due to the fact startups valued at larger than $1 billion used to be pretty rare) are choosing to get listed on an exchange at a much later stage than startups from a decade or two ago. While this delayed listing can also be partly be attributable to the drawbacks listed above, the primary cause ought to be that well-managed startups with a compelling business proposition have access to unheard of amounts of capital from sovereign wealth funds, private equity, and venture capitalists. Such access to apparently limitless quantities of capital would make an IPO and exchange listing much less of a pressing issue for a startup.

The number of publicly traded companies in the U.S. is also shrinking—from more than 8,000 in 1996 to around to between 4,100 and 4,400 in 2017.