Stock Markets: The company risk of listing

Stock markets are where the government and the industries businesses can raise long term capital and investors can buy and sell securities. To be listed on the stock market is vital for any business who intends to grow and provide funds for the business and increase the status of the company.

Not only does it help the business continue with its growth, it also makes the business accountable to its stakeholders, thus helping society through systems such as Corporate Social Responsibility (CSR); whilst also allowing benefits to its employees through share reward schemes. Which in turn even makes it easier for shareholders to move between companies if they are unhappy with the business. Listing on the stock market offers liquidity to the investor while encouraging flow of funds to firms.

Such companies like Toyota aimed to enlist its shares on the London and New York stock exchange in order to attract international investors, while meeting the needs of the increasingly global industry and increasing their image. Another reason to enlist globally is to be able to judge whether the company can meet global standards. An example of a company who is enlisted on the London Stock Exchange but their headquarters are in Mexico is Fresnillo. Fresnillo is the world's largest producer of silver from ore (primary silver) and Mexico's second-largest gold miner. The first Mexican firm to have its primary listing on the LSE, they are a constituent of the FTSE 100. The reason they are enlisted on the LSE is because of better liquidity and corporate governance.

However, listing on the stock exchange isn't always great for businesses. As the stock market and share prices are influenced a great deal by the news, share prices are subject to volatile changes if the shareholders are not happy.

Word of mouth can affect the stock market and share price, even if shareholders are happy that the company are making profits and improving, looming talks of the company being unable to keep up with expansion will set back the share price.

The stock market is therefore not always a great place for businesses to be, despite its many advantages to the company, we can see through Twitter that increasing profits are not always enough to satisfy the shareholders and in turn keep the share price level.