May 26, 2020 (The Expresswire) -- The stock exchange is a market in which securities are bought and sold. It gives companies the ability to access capital through share purchase plans, initial public offerings, and various other alternatives.
In general, this involves offering shares in a company in return for money. This makes the recipient part-owner of the company. This also helps the company spread the risk.
The owners of the shares may go on to sell them for a profit further down the track in the secondary market.
On top of this, there are various other benefits for companies that list on the stock exchange:
Increased public exposure — They get a bigger profile compared to private companies. This is because publicly listed companies often receive media coverage. This can entice new customers and clients, increasing the overall value of the company.
Employee incentive programmes — This allows executives and workers to accrue shares. They are generally referred to as performance shares. They can be given to employee as a reward for meeting certain expectations. For example, meeting revenue targets or share price targets. This can encourage employees to achieve the goals given to them and attract top talent. This, in turn, can accelerate the company’s growth.
Why do companies list on the stock exchange?
Companies list on the stock exchanges is to raise money from the public at the best rates possible.
How has this benefited some of the most well-known companies?
McDonald’s Corp [NYSE:MCD]
McDonald’s is a global icon and a beloved brand. Since going public in 1966, the company’s growth has been extraordinary. They have expanded to over 100 countries, and they have over 30,000 outlets worldwide. Their Big Macs and Happy Meals have delighted customers of all ages.
Not even the COVID-19 pandemic has dampened the appeal of McDonald’s. Over the past few months, as some countries have started to lift their lockdown restrictions, the company has enjoyed pent-up demand as consumers rush get their fast-food fix.
No great surprise there. McDonald’s has built its empire with consistency. It has actively sought out fresh ways to compete and adapt to changes in consumer consumption. By innovating, their profits remain steady.
Shareholders have benefited from McDonald’s positive track record in paying dividends and stock splits. Strategic moves have succeeded in delivering good long-term return.
Johnson and Johnson [NYSE:JNJ]
Look at your favourite brand of bandage. Or shampoo. Or medication.
Chances are, it was made by Johnson and Johnson.
Johnson and Johnson is a household name and a global leader in the healthcare sector. It creates innovative products and services by embracing medical research.
Johnson and Johnson went public in 1944, before most of us were even born. Back then, the stock exchange was not how we know it today. In fact, those were the days where milk only cost 15c!
From humble beginnings, Johnson and Johnson’s growth trajectory has surged in recent years.
Facebook, Inc [NASDAQ:FB]
Do you have a Facebook account? Do you use it to keep in touch with your family and friends? Do you enjoy sharing stories, pictures, and videos?
Yes, Facebook has single-handedly transformed our cultural landscape with social media.
Facebook is one of the FAANG Stocks — a group of incredibly influential and powerful companies that also include Apple, Amazon, Netflix, and Google.
It might be hard to believe it now, but Facebook founder Mark Zuckerberg was originally reluctant to take the company public. His reason? He was concern that he might lose control over the direction of Facebook.
But, ultimately, Zuckerberg had a choice. Between 2004 and 2012, Facebook’s private shareholders expanded to more than 500. By law, this meant that the company had to go public.
So, Facebook reluctantly got listed on the Nasdaq Stock Exchange. And, surprise, surprise, this social-media company has flourished since then, making a bonanza of profit for stockholders.
Source: Yahoo Finance