IPO Readiness: Choosing The Right Stock Exchange

Going public is a transformative step forward for every company — but a successful public launch requires meticulous planning.

One of the critical steps in the run-up to an initial public offering (IPO) is choosing the stock exchange on which your company will list its shares. The decision shouldn't be made lightly: every exchange is different and your choice will impact the outcome of your IPO in significant ways. 

If you’re taking the first steps on your IPO journey, it’s likely you’re juggling a number of readiness challenges, but it’s worth considering stock exchange options as early as possible so that you can plan your eventual listing, and get ahead of potential obstacles. 

To help you navigate that decision making process, and understand its key considerations, check out our IPO readiness stock exchange guide. 

The Importance of Stock Exchange Selection

Choosing a stock exchange isn’t a box to be ticked in the run-up to your public launch. Your choice will have pre and post-IPO consequences, affecting investor perceptions, regulatory obligations, and long term financial outcomes. 

Here are the key reasons why the decision is so important:

• Impact on company valuation and investor perception: The reputation of your stock exchange will affect the way that investors view your company’s stability, its prospects for growth, and its industry credibility. Listing on high profile exchanges, like the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE), will likely drive your company valuation higher, but make your IPO preparation process more challenging.
• Influence on regulatory requirements and compliance obligations: The jurisdiction in which an exchange trades will impose specific regulatory requirements on publicly owned companies. Meeting those requirements will impact budget and resources pre and post-IPO. 
• Long-term effects on liquidity and shareholder base: Your stock exchange will influence the outcome of your IPO over the long-term, affecting your profile with investors, your stock liquidity, and the base shareholder group that you develop. 

Key Factors to Consider When Choosing a Stock Exchange

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The following key factors typically play a significant role in a company’s choice of stock exchange: 

Market Perception and Prestige

• Exchange reputation: The reputation of a stock exchange may influence a company’s decision to list there. For example, different exchanges specialise in certain industries or types of trading activity, and attract certain kinds of investors. 
• Exchange focus: Examples of exchange specificities include NASDAQ, which is known for technology company share trading, the New York Stock Exchange (NYSE), which is known for trading blue chip companies, and the London Stock Exchange (LSE), which is known for a more global trading focus.

Listing Requirements

• Financial thresholds: Stock exchanges typically impose a minimum threshold on market capitalization and revenue. The NYSE, for example, requires a minimum $50 million market cap.
• Corporate governance standards and reporting obligations: Stock exchanges impose governance and financial reporting standards which may require companies to uplift their compliance performance. 
• Compliance differences: A comparative assessment of regulatory requirements across stock exchanges often affects a company’s decision on where to list. 

Regulatory Environment

• Regulatory disparity: Financial regulations affecting public companies may differ significantly across jurisdictions. In the US, for example, companies must comply with the SOX Act, while EU companies must comply with EU Parliament Directives. 
• Reporting disparity: The EU typically requires public companies to submit financial reports which adhere to the International Financial Reporting Standards (IFRS), while in the US, public companies typically use the Generally Accepted Accounting Principles (GAAP).
• Industry-specific regulations: Companies operating in certain industries, such as financial services and healthcare, may face additional regulatory requirements if they begin trading as public companies.  
• Ongoing compliance and operational flexibility: Maintaining ongoing compliance with jurisdictional regulations may influence a company’s choice of stock exchange. 

Investor Base and Market Liquidity

• Access to institutional vs. retail Investors: Different stock exchanges attract different kinds of investors. NASDAQ, for example, attracts tech-focused institutional investors, while smaller exchanges typically attract a higher number of retail investors.  
• Trading volumes and liquidity considerations: Stock exchanges with higher trading volumes typically offer better liquidity and less share price volatility.
• Geographical concentration of investor community: Larger stock exchanges, such as the LSE attract a diverse global investor base. Smaller exchanges may attract more concentrated regional investment interests. 

Costs and Fees

• Initial listing fees and ongoing compliance costs: Stock exchanges may charge a fee for a company’s initial listing. Companies should also take ongoing compliance costs into account after they transition to public ownership. 
• Comparison of cost structures between exchanges: Fees and cost structures between exchanges vary, and are sometimes dependent on market cap. 
• Budgeting for additional expenses: Companies must allocate financial resources to regulatory filings, reporting obligations, legal fees, and other ongoing public ownership concerns. 

Geographical and Sectoral Focus

• Listing in home country vs. international exchange: There may be financial and regulatory pros and cons for companies listing on domestic exchanges, as opposed to overseas exchanges. While a domestic exchange may, for example, offer regulatory familiarity and cultural alignment, an international alternative may offer strategic investment advantages relating to incorporation, taxation, and so on. 
• Sector specific benefits: Stock exchanges that cater to specific industries may serve certain companies better, helping to increase their profile with investors, and boost the value of their IPO and share price over the long term. 
• Case example: 

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Recent Trends and Developments in Global Stock Exchanges

The IPO landscape is continuously evolving. Recent developments include:

Emergence of Alternative Trading Platforms

Stock exchanges are not the only venues in which private companies can trade shares. Changes in financial regulations in jurisdictions around the world have facilitated the emergence of alternative trading platforms, such as Euronext, eToro, and Robinhood. These platforms enable retail investors to buy and sell shares electronically via websites and mobile apps. 

Shifts in IPO Activity

IPO share sales in Europe reached a collective value of over €90 billion in 2021, but fluctuated in the following years due to factors such as the pandemic and the economic downturn. However, recent data suggests that public offerings are trending upwards in value again: in 2024, European IPOs raised over €14 billion – a rise of over €7 billion.from 2023. The positive trend is set to continue in 2025. 

Impact of economic policies and global events

Changes in political leadership can have a significant effect on stock markets, not least as a result of new financial policy, such as interest rate changes. Similarly, geopolitical events, such as international sanctions or tariffs, may significantly affect share price and an IPO’s potential to raise capital. 

Steps to Evaluate and Select the Right Stock Exchange

Before selecting a suitable stock exchange, companies should work through the following steps. 

1) Conduct an IPO Readiness Assessment

Companies should assess their IPO readiness by assessing the following factors:

• Financial health: Companies should demonstrate strong financial health in the run up to an IPO in order to boost investor confidence, manage pre-IPO fees, and demonstrate competent governance.
• Internal processes and compliance framework: Companies must be able to meet the compliance standards of public ownership. That includes an increased reporting burden which may require internal control adjustments. 
• Corporate governance: Company leadership must be able to meet the enhanced governance responsibilities of public ownership prior to listing on an stock exchange. 

2) Engage with Advisors and Stakeholders

• Advisors: Your financial advisors, legal counsel, and underwriters will be able to offer insight into the regulatory compliance burden and market conditions that your choice of stock exchange will impose. 
• Internal stakeholders: Assemble an internal team of leaders, investors, and board members to provide oversight for your IPO preparation process, and establish alignment on IPO goals.  
• Exchange expertise: Seek advisors with specific knowledge and expertise in the stock exchanges that you are targeting for your IPO. 

3) Analyze Case Studies of Similar Companies

• Peer experiences: Research the stock exchange choices of industry peers, and their listing experience on those platforms. 
• Outcomes and post-IPO performances: Examine the financial outcome of previous company IPOs on target exchanges, along with those companies’ post-IPO performances. 
• Relevant insight: Map relevant data onto your company’s IPO profile. Use that insight to inform your pre-IPO decision-making and your choice of stock exchange.

The Value of Expertise

Remember, choosing a stock exchange isn’t just about optimizing the public launch of your company, but ensuring that you can consolidate your market position over the long term, accounting for factors such as market volatility, shareholder relations, and wider financial trends that might affect your investor community. 

To meet that requirement, you’ll need to build a team of experts who can optimize the value of your stock exchange. Your team will play a critical role, pre and post-IPO, helping you navigate your public launch by conducting readiness assessments, course-correcting when challenges arise, and identifying opportunities to boost financial outcomes. 

The performance of your IPO team may have a direct impact on your share valuation, your compliance burden, investor perception, and so on. 

Empower Accountants with FloQast

Ultimately, the stock exchange you choose will be a reflection of your company’s identity — and so should align with the expectations and interests of your employee community, your investor community, and your long term strategy and goals. 

FloQast has helped thousands of companies around the world approach and navigate their IPOs successfully. Our platform is designed to streamline financial reporting and compliance from end to end, eliminating process inefficiency, integrating automated speed and accuracy, and empowering accountants to do their jobs more effectively. . 

To learn more about how FloQast supports IPO readiness, get in touch today. 

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