When their own resources have been depleted, startups as well as SMEs have to secure new capital. In addition to classic outside financing via banks, capital from venture capital funds is increasingly available to startups and other new fast-growing companies. In the early growth phase, private equity is catching up with financing through loans.
At this stage, it’s still too early for public equity – that is, an IPO. Such a move can make sense, however, for more established SMEs that are at a later stage in their growth. But this form of accessing capital remains rarely used.
According to the aforementioned study “The Future of SME Financing”, the reasons for this are numerous. It’s widely felt that an IPO is resource-intensive and that small companies can’t meet disclosure requirements. Often, it’s simply a matter of being unaware that this path is even available.
Listing your own company on the stock exchange is no longer just for the big players. Similar to BME Growth in Spain, SIX Swiss Exchange has launched Sparks, a trading venue especially for SMEs.
If you want to list your company there, and put the shares (at least 15%) up for public trading, the hurdles you face are lower than on the main segment of the Swiss stock exchange. For example, the fees for listing are 50% lower, and the requisite market capitalization is less than 500 million Swiss francs.
Sparks also ensures transparency and investor protection. That’s because all companies listed on the Swiss stock exchange are subject to the same reporting requirements and regulatory supervision. Shares of newly listed, growing SMEs typically have less liquidity. Sparks takes this into account with a shortened trading window.
A market flotation not only provides a growing company with an efficient influx of capital, it also leads to higher visibility and a wider diversification among investors.