chapter
8
A rock or a soft place?
The hidden cost of equity
W
hat’s all the fuss about being a public company
anyway? I recently asked the CEO of a FTSE 250
company, “What’s the advantage of being listed?” She
shrugged and said, “I don’t know; it can give you access to some
capital I guess but, apart from that . . .”.
Of course it sounds rather sexy and exciting. Many CEOs don’t
just want to be a CEO; they want to be the CEO of a public
company. But what are really the advantages of having your
company listed on the stock exchange? Naturally, selling equity
is a source of money, but of course there are other sources of
capital which could sufce for your investment plans. But,
alright, I’ll give you that; it’s one potential source of money.
Yet, I would say this source comes at a cost. Investment bankers
will be able to spell out to you – in much too much detail – what
the advantages and disadvantages are of the various sources of
capital, including equity. However, I think they’re forgetting
one.
I recently spoke to Bill Allan, CEO of THUS (the former Scottish
Telecom). Some years back, all of a sudden they were elevated
into the FTSE 100. He admitted that, at once, he found himself
having to spend the majority of his time dealing with fund
managers, analysts, investors, the business press, etc. Of course
this was a relatively unusual and extreme situation; the telecom
bubble launched THUS into the FTSE 100 when they weren’t
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