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Listing on a Stock Exchange
The first step in listing on a stock exchange is for a company to file a listing application with the exchange of its choice, along with a filing fee. The introductory application includes an itemization of the amounts and types of stock that the company wishes to list on the exchange, the size and composition of its shareholder base, and identification of its directors and officers. The exchange then follows up with more detailed questions, which generally inquire about any outstanding lawsuits, the availability of financing arrangements, recent SEC comment letters, recent private placements, investor relations consulting agreements, and research reports and investor newsletters about the company.
The exchanges are also very particular about having a company conform its bylaws to their requirements, particularly in regard to the structure and composition of its audit, nominating, and compensation committees.
The exchange then reviews the application to ensure that the applicant is in compliance with the exchange’s listing qualifications. The review is typically two-stage, with a staff person conducting the initial review and summarizing the application for a supervisor, who will then pass judgment on the application. If there are issues, then the exchange sends a comment letter to the company, describing what must be changed before it will approve the company for listing. The exchange also reserves a ticker symbol for the company at this time. The applicant then sends back a response letter, detailing the actions it has taken to comply with the exchange’s requirements. There may be several iterations of questions and answers between the exchange and the company, which usually requires multiple months to complete.
If the exchange approves the applicant for listing, then the company and the exchange mutually agree upon an initial trading date. Depending on the exchange, the company’s CEO may be invited to ring the opening bell on the initial trading date. Also, for some exchanges, the company will select a specialist who is responsible for making a market in its stock.
Podcast
There is a discussion about listing on a stock exchange in Episode 69 of the Accounting Best Practices podcast. Listen Now.
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