The Advantages & Disadvantages of Listing in the New York Stock Exchange
Businesses that decide to sell stock on the open market can raise a large amount of capital for investing in the future. A company begins selling stock with an IPO, or initial public offering, by choosing a stock market where the shares will be bought and sold. The New York Stock Exchange, or NYSE, was founded in 1792 and remains one of the world's most sought-after markets for companies.
Other People Are Reading
-
Brand Recognition
-
The NYSE gives companies that list stock on it a great deal of brand recognition. The NYSE is famous around the world as financial analysts and investors examine the stocks it trades to learn about the American and world economies and identify potential investment opportunities. The status of being publicly traded on the NYSE may help companies find new investors more easily and inspire confidence in their overall market position. Alternatively, companies that leave the NYSE to sell stock on another, less prestigious exchange may appear to have a weaker position.
Restrictions
-
The New York Stock Exchange places restrictions on companies that list there, only allowing those that meet certain qualifications to register on the exchange. Companies must have at least 1,100,000 outstanding public shares. This eliminates smaller companies and those that retain a large number of shares within the company. As of 2011, the market value of an IPO in the NYSE must be at least $40 million, which also serves to restrict access.
One advantage of the NYSE is that, despite its restrictions, companies can qualify in one of several ways. For example, a company with $500 million in global market capitalization or more than $10 million in pre-tax income in each of the past three years may be eligible even if it doesn't meet the general restriction guidelines.
-
Cost
-
The NYSE is an expensive stock market for companies to list their shares on. According to Forbes, annual fees for listing on the NYSE run between $35,000 to $500,000. This is significantly higher than the $21,225 to $60,000 that companies pay each year to list on the NASDAQ, which is the other major stock exchange in New York.
Human Element
-
The New York Stock Exchange requires human brokers to hand in trade orders on the stock exchange floor. This slows the process of buying and selling stock and adds a human element to the decision making of investors. The Forbes website notes that both institutional and retail investors may prefer the speedier, more "pure" approach of markets such as the NASDAQ where the system is automated and there is no need for human interaction.
-
