Benefits of Going Listed for Existing Shareholders

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Author: Mr. TRY Taihy

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Posted on 22-May-2018

“Net Worth” is becoming a concept to calculate how much a person or business is worth. Net worth is the amount by which assets exceed liabilities. For example, I have 5K saving, 100K worth stock portfolio, and 50K loan. Therefore, my net worth is 55K USD (5+100-50=55).  Equity is the most common asset used to calculate the net worth of the world raking billionaires.

Going listed seems a new topic for Cambodian business owner. Most of them do not understand the benefits of going listed and how to prepare. Besides the benefits to economy and company itself, going listed will provide existing shareholder the benefits of risk sharing and an increase of share value.  Before Alibaba was listed on the New York Stock Exchange, we did not know Jack Ma, founder of Alibaba Group. Listing his company on the stock exchange made him be one of the wealthiest men in China.  Why? Below are the benefits of going listed for existing shareholders :

  1. The increase of share value: Going listed or share trading normally is not at the same price as its book value.  People are willing to buy the share at a higher or lower price than the book value according to the current and future business and cash flow of the company. If a company is performing well in the recent years and expected for a high growth, the share price will be much higher than the book value (equity per share). This is because the ROE of the company is much higher than interest rate at the bank. People are willing to pay more to get a higher return on the stock holding. The stock price might increase or dividend might be high. Therefore, if the company is doing well, going listed will make the company share price many times higher than the book value.
  2. Risk sharing and exit strategy: After going listed or share issuance, the proportion of shareholding of existing shareholders will decrease. In the other words, there will be risk sharing between existing and new shareholders. Normally the existing shareholders hold a higher proportion of share, so they still have right to set plan and implement projects they want with risk sharing. Existing shareholders can sell shares at a quite high price to run other business with higher growth.
  3. Better business operation: Being a listed company, applying standard management is required. Therefore, the management is more effective than a normal company. This will increase the income of the company or value of existing shareholders.

If you have any inquiries regarding going listed, please feel free to contact our team at Tel: 023 858 888 or Email: listing@csx.com.kh.