Initial public offering (IPO)

Selling shares on the public markets to attract investors, without giving up a controlling stake in your business.

An IPO (initial public offering) is the first time a business raises finance publicly. Before that, it can only use private investment.

Going public allows your business to raise large sums of money from new investors. Because there are lots of investors with a small percentage of ownership, but no majority stakeholders, you can retain control of the business.

An IPO is sometimes referred to as either ‘listing’ or ‘floating’ on the public market. In the UK, public markets (see below) sit within the London Stock Exchange.

This method is often called ‘long-term capital’ or ‘patient capital’, as businesses can use it to raise money time and time again, over years and even decades.

Once your business is a public company, you have to regularly disclose financial information. You must update shareholders and the market with half-yearly and annual results.

What are the different IPO markets?

  • Main Market – for larger businesses; home of FTSE 100 and 250
  • High Growth Segment – for tech-specific businesses not quite ready for the Main Market
  • AIM – for smaller, growing businesses looking to scale

The AIM market is the world’s most successful growth marketLink opens in a new window, so it’s suited to smaller businesses that are looking to grow. AIM has less prescriptive rules than the Main Markets to make sure that businesses can go public and raise finance as easily as possible.

Nominated adviser or sponsor

Your nominated adviser (often called a ‘Nomad’) on AIM, or your sponsor on the Main Market, helps prepare and admit your company to the public markets.

Broker

Manages your fundraising activity on the market.

Accountant

Responsible for detailed financial reporting.

Law firm

Performs due diligence and oversees the listing from a legal perspective.

Registrar

Manages the register of your shareholders.

Financial PR firm

Helps craft your story and maintains media interest in your company.

Long-term finance

It’s easy to raise more money once you’ve listed your business, without having to go through the process again.

Retain control

On AIM, there’s no minimum ‘free float’ criteria (the percentage of the business put on the market). You’ll be notified if one investor tries to buy beyond your pre-set threshold.

Increases brand profile and awareness

This can help boost sales.

Gives staff an incentive

With employee share options.

Secondary market for shares

This allows existing investors to exit.

No guaranteed return

You may not achieve the valuation you had hoped for.

Costs

There are charges involved in retaining your appointed advisers, including your broker, law firm and PR agency.

About your business

  • Business stage:  Established and growing
  • Annual turnover: Over £5m (does not apply to healthcare businesses)
  • Sectors:  All (healthcare and tech may be able to list earlier in their lifecycle than other sectors)
  • Regions:  All

 

About the finance

  • Purpose of finance: Acquisition, product development, new markets
  • Amount available:  Up to £200m on AIM, over £1bn on the Main Market
  • Duration of finance:  10 years or more
  • Cost of finance:  You'll need to appoint your advisers, build your board and spending time making the business ready for public life. An IPO can cost approximately 8% of the amount you hope to raise.
  • Time it can take to get finance:  IPO processes take 10–12 weeks, but planning and negotiations can take 12–18 months

Ask an expert: Geoff Nash, Nomad and corporate finance director at finnCap

What do you look for in a business?

Management and track record

Have you:

  • done this before?
  • had success in public or private markets?
  • grown a business?
  • done it well?
Financial profile

Is your product commercially viable? Can you prove it? Are you profitable? How much profit?

Scalability and opportunity

Does your product or service have national and global appeal? Will it translate into other markets?

Time

An IPO can take months and sometimes years, so take your time when choosing business advisers. They’ll be with you for the duration of your life as a public company.

People

The IPO process will absorb your CEO and finance director for at least six months. The director team will need to keep the business running in the meantime.

Life as a public company

Once you’ve successfully listed, you’ll need to comply with transparency and disclosure rules. This means you must disclose business information like company wages, finances and tax.

Ongoing costs

You’ll need to retain your Nomad, broker, law firm and PR agency for as long as your business is on the market. As a result, you should factor in these fees when determining your outgoings.

lPOs are often years in the making — and there’s lots of planning to do upfront. Once everything is in place, the process takes between 10–12 weeks.

This infographic outlines what it takes to complete an IPO.

To learn more about how to list on the public markets, read the London Stock Exchange guide for entrepreneursLink opens in a new window

“IPOs give companies credibility, visibility and profile. They’re a stamp of quality, a chance to get your brand out there and an opportunity to make sure everyone knows who you are and what you do.”

Geoff Nash Corporate finance director, finnCap

Other finance options

Click here to visit Corporate Venture Capital
Equity
Corporate Venture Capital is an investment made by a large company into a smaller business, in return for a share of that business.

Corporate Venture Capital

Corporate Venture Capital - Investors like

An early stage business - no revenue or profit is needed - willing to give up a share of control.

Corporate Venture Capital - You're looking for

£1m+ of finance within 6-12 months of your application for things like acquisition or research and development.

Find out more about Corporate Venture Capital
Corporate Venture Capital
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Corporate Venture Capital
Purpose of financessss Acquisition, research and development
Amount of finance £1m+, depending on business
Duration of finance 3-5 years
Cost of finance None
Time of finance 6-12 months
About your business
Business stage Any
Annual turnover Depends on the business
Sectors All
Regions All
Click here to visit Angel Investment
Equity
Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.

Angel Investment

Angel Investment - Investors like

Early-stage businesses with a turnover of less than £5m. They invest in any sector but like businesses with a scalable business proposition.

Angel Investment - You're looking for

Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.

Find out more about Angel Investment
Angel Investment
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Angel Investment
Purpose of financessss Working capital, product development, entry into new markets, build teams, increase sales
Amount of finance Usually £15k-£500k, but large Syndicates may offer up to £2m
Duration of finance Typically 3-8 years
Cost of finance None
Time of finance 2-6 months
About your business
Business stage Generally early stage, pre-revenue or pre-profit
Annual turnover Less than £5m
Sectors All sectors, but especially suitable for companies with a scalable business proposition
Regions All regions
Click here to visit Asset-Based Lending
Debt
A business secures finance against its existing assets; these can include invoices and also machinery, property and even intangible assets such as IP.

Asset-Based Lending

Asset-Based Lending - Lenders like

Established businesses with assets and a trading history.

Asset-Based Lending - You're looking to

Raise finance from untapped assets on your balance sheet.

Find out more about Asset-Based Lending
Asset-Based Lending
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
About your business
Business stage Established with assets and a trading history
Annual turnover Variable – dependant on asset values
Sectors Any
Regions Any

Regional support

Enter your postcode to find business support and case studies from businesses within your region. You'll be taken to our interactive map.