Listing of Shares in Stock Market
Shares, before being offered to the market need to be listed on stock exchanges for the purpose of trading. Listing implies that the shares have been listed on the stock exchange and are available for trading in the secondary market. The process of listing on the stock exchanges is done within 7 days of finalization of issue. Usually, it takes around 3 weeks after the closure of the book-built issue for shares to get listed. In case of fixed-price issue, it would be around 37 days after the closure of the issue.
After the shares are listed, an investor can trade by opening a broking account with a registered stock broker and he can follow the usual procedure of placing an order for sale of the number of shares he wants to sell and also fix the price at which he wants them sold. It has been generally observed that there is a huge volatility in the market on the day at which shares gets listed with the prices getting public and the forces coming into play in bringing the shares down to a fair price in the secondary market.
The prices of the listed shares in the secondary market might or might not be higher than the offered prices. In case the prices are less after the shares get listed, you can always hold on to your stocks until the markets moves in a favorable direction again.
The companies that are willing to get their shares listed need to sign an agreement with the stock exchanges where the securities are listed. The agreement enforces certain rules and regulations on the company following the listing procedure and in case of violations of these, the stock exchanges have the right to impose monetary penalty against the concerned company and if needed may also decide to de-list the shares.
Listing of shares gives a company two added advantages: to gain access to risk capital and to make their shares more liquid by being traded in an open market. Companies also list shares because it is a common market trend that investors usually invest in listed shares because listed companies are subject to stricter requirements compared to unlisted companies and this fact provides extra confidence and security to investors in general.
Through listing of shares, companies can expand their investor base and gain access to risk capital. That generates finance aiding in the continued growth of the company. Moreover listing provides up-to-the-minute pricing of the company's shares that is beneficial for the existing shareholders and makes it easier to offer shares keeping in mind future acquisitions. Listed companies are known to attract more favorable terms and conditions in the credit market.
Listed shares also enjoy more hype through media coverage and broking firms and that creates more credibility for the shares. This leads to higher demands for the shares and higher valuation for the company. Listing the company on the stock exchange gives the shareholders an access to an efficient, regulated market place, which is considered an optimal arena for share trading. Listing also improves liquidity and ensures correct pricing of the company shares.
Listing also enables employees to become shareholders. This can be arranged through various types of share purchase and share option schemes. Listed companies are subjected to regulatory requirements and hence show greater transparency and regular reporting. With all the above-mentioned benefits, no doubt listed companies or companies with listed shares attract greater number of shareholders.
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