Any company that has ambitious development plans will at some time or another consider seeking listing on a stock exchange. Stock exchanges maintain various lists of securities, with different requirements for securities and their issuers to be complied with. Thus, NASDAQ OMX Armenia has two lists for stocks – A and B - and two for bonds – Abond and Bbond. The stock exchange must see to it that the securities included in the lists comply with respective criteria. So, while the listed status of a security does not guarantee that it will do well in the market, the fact that its issuer was able to comply with the requirements and qualify for listing is regarded as a sign of quality.

Listing and Initial Public Offering of Securities

Companies can list their outstanding or newly issued securities. In the latter case listing of securities on the stock exchange is preceded by an IPO. When used in the context of capital markets, the widely known abbreviation “IPO” stands for “Initial Public Offering” and means the first allocation of newly issued securities, usually stocks or shares, to the public. If you hear that a company decided to “go public” or “float its shares”, then it’s setting up for an IPO and plans to have its shares listed or admitted to trading on the stock exchange.

To do an IPO, the issuer company often employs the assistance of an investment company, which then becomes the underwriter of the issue. The underwriter will help the company to see the process through, from the planning stage, including price determination, to the actual sale of the securities to investors.

Why is Being a Listed Public Company Good?

IPOs have long been the main source of capital for companies worldwide. This brings us to the advantages of doing an IPO and being listed on a stock exchange:

• IPOs are a way to raise equity capital to expand and grow the business;
• making shares publicly traded provides an exit mechanism for founders and shareholders of the company whose stakes become more liquid and can be cashed-in quickly;
• IPOs normally ensure lower cost of funds compared to borrowings from banks;
• an IPO and an exchange listing can enhance the reputation of the company and provide additional publicity through increased and continuous media attention;
• the issuer builds up a history in the market: once you’ve done your IPO successfully, it will be easier to generate equity funding from the stock market in the future;
• additionally, Armenian companies that go for IPO and then list on NASDAQ OMX Armenia may enjoy certain tax advantages (for more information please check out the Legislation section of our website).

What it Takes to Live as a Listed Public Company

While being a very rewarding initiative for reasons mentioned above, IPO is also quite an expensive and rigorous commitment. Apart from underwriter fees, the issuer company will need to ensure that it complies with best corporate governance practices and remains at all times transparent to the public, its existing and potential shareholders. This, apart from the annual audit, implies maintaining an up-to-date website, setting up communication channels including media, establishing an Investor Relations function. The larger number of shares you want to allocate to minor holders (see “free float”), the larger the “audience” you are accountable to.

In 2010 Armenian Government approved Armenian Corporate Governance Code, which set standards of corporate governance in line with international best practice, taking into account the Armenian practices and framework. Good corporate governance allows companies to increase their competitiveness, economic efficiency and growth, to attract the capital required for economic growth and reduce the cost of such capital, improve operational decision-making and the company’s reputation, as well as to promote protection of and cooperation with stakeholders who have a legitimate interest in company’s performance.

Companies that are interested in learning more about doing an IPO and getting listed on NASDAQ OMX Armenia are kindly requested to contact Nerses Hakobyan, Head of Listing, Market Services, Tel.: +374 10 54 33 21 ext.120. Stock exchange member companies are also there to help and provide professional advice and any assistance that you may require.