• Post category:Articles
  • Post published:1 April 2021

Shifts in the IPO Market

A development-stage or emerging-growth company listing on a senior exchange can be a significant investment opportunity for a wide range of companies and investors.

1 April 2021

It also offers a chance for unmatched stock appreciation and added job creation and economic stimulus as the company grows. Similarly, by listing on a senior exchange, a broader range of investors can invest in public companies and participate in their growth and wealth creation.

While everyone wants to invest in the next unicorn, these companies are mostly owned by large institutional shareholders, which limits the smaller retail investors.

Unlike unicorns with market values of more than $1 billion, microcaps can provide an excellent opportunity for entrepreneurs to reap the rewards of publicly listing their stocks and a significant benefit for early investors. This is especially true for smaller, high-growth companies like those in emerging industries.

Capital markets are seeing a flow of public money, which means investors are willing to risk investing in newer or early-stage companies, betting that the company could become the next big thing. As a result, micro-cap, publicly traded companies are going public sooner than they have ever been able to.

These are just a few of the potential advantages of micro-IPOs:

  • Creates more capital-raising opportunities and financing options, typically at a higher valuation and a lower cost of capital
  • Establishes a value for the company’s securities and creates a public market for them
  • Increases liquidity for existing and future investors and provides an exit strategy for venture and institutional investors
  • Increases legitimacy and visibility which may, in turn, generate greater interest and awareness of the company
  • Creates a second currency with the company’s common stock, allowing the use of that equity instead of cash for acquisitions and attracting and compensating management, employees, directors, and strategic partners.
  • Gives investors who want to get in early on the high-growth phase of a company access that previously was available exclusively to venture capitalists and private equity firms

As the prerequisites to enter the stock market continue to change, knowing what micro-IPOs are could provide both investors and entrepreneurs an edge in the market.

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