Life as a listed company

Entrepreneurs rightly view stock market listing as a milestone, but it is only a beginning, not an end. Companies whose market debut attracts institutional and retail investors begin a new existence, where success is shaped by the quality of their relationship with the market.
Listing becomes the core of their financial and growth strategy. An IPO goes well beyond regulatory issues, day-to-day market performance and the capacity to raise more capital. Listing is an asset to be maintained and carefully tended; it is a resource that the company can use to seize new opportunities to grow, either organically or through M&A.

Once listed, a company can raise capital and do strategic deals far more easily. This is the payoff for a successful listing — one that provides solid, compelling information and attracts enthusiastic investors.

Additional rounds of funding can be used to:

• Fund R&D
• Open to new markets / countries
• Make Acquisitions
• Strengthen the company’s capital base
• Achieve a better balance of equity and bonds
• Offer partners or shareholders an opportunity to raise their stake in the company
• Fund employee shareholding plans
• Offer bonus issues
• Propose optional dividends

To raise capital, the issuer can go either through a public or a private placement. Companies can also issue bonds—listed or not—to raise bonds and round out equity. Some hybrid products combine bonds and equity. This is the case of convertible bonds, a common means of raising funds; such issues are easier when an underlying product is listed on the stock market.

Corporate Actions can help the issuer fulfill various strategic goals: develop its brand image, optimise its capital structure, or invigorate its shareholders' loyalty for example.

With around 6,000 listed companies in Western Europe, investors are spoiled for choice and competition is fierce. To win shareholder favours, listed companies must differentiate their offer, designing attractive marketing strategies and crafting relevant messages for their targets.

Targeting investor profiles

Listing on Euronext gives companies access to a wide pool of investors with various profiles. Investor aims and roles vary:

• Institutional investors: asset managers, insurers, pension and sovereign wealth funds focus on capital gains within a 1 to 3-year investment horizon on average. They are usually the largest contributors to financing rounds
• Family Offices and private banking: managing assets for high net worth individual with a long-term perspective
• Retail investors: individuals managing their personal savings. They are more sensitive to sector/product exposure and management performance. They help boost liquidity and are usually loyal shareholders

Identifying and understanding shareholders

To deploy a successful investor relations strategy, companies need an accurate list of all existing and potential shareholders. As with any communications strategy, this means identifying targets and making efficient use of databases. All of which requires a serious investment in time and database management. One option is to assign this task to an in-house Investor Relations Officer; another is to outsource the function to a specialised expert.

How we can help you identify your shareholders

From the very start of the listing process, company leaders will define their goals for the next three to five years, their shareholder strategy, and their financing requirements.

Investors want an easy-to-understand business model with identified growth vectors. Quality of management and governance are also key criteria. More generally, investors and analysts seek transparency in corporate communications. This means publishing high quality information with clear, simple, accurate content. Access to management is also critical.

How sell-side analysts influence investment decisions

Analysts are the first to relay the company’s equity story when it lists, and are the first sources of information for potential investors. Expectations are often high, and the company must keep close watch over any gap between its own estimates and analysts’ projections.

One of the main differences between private and public companies is the amount of information the latter must provide to the market.

From the regulator’s point of view, financial information must be accurate, detailed and published in good faith, and it should be released according to an agreed annual calendar. In the meantime, events that are likely to influence investor perceptions of the business—and thus its share price and value—must be announced immediately and to all investors at the same time.

View ongoing obligations per market

Environmental, Social and Governance principles (ESG) are a set of standards by which a company can measure the wider impact of its operations and long-term strategy.

The need for information is not limited to investors; a wide range of stakeholders increasingly require updates from listed companies regarding the most significant opportunities available and how to manage the risks to which they can be exposed.

Euronext has developed guidelines to help listed companies in their interactions with investors and the wider ESG community, to help them understand how to address ESG issues as a key component of investor relations, as well as the main principles to consider when preparing an ESG report.