Earlier this year, Elon Musk’s SpaceX debuted on the US Nasdaq stock exchange in the largest initial public offering (IPO) in history, which valued the company at US$1.77 trillion and raised $75 billion in capital. That could be topped in weeks if, as anticipated, AI model developer Anthropic floats at a valuation of US$2 trillion, raising US$100 billion.
Things have been somewhat quieter on this side of the Atlantic, with departures from the Euronext Dublin Irish stock exchange more likely to command headlines than debutants. Indeed, the most recent flotation came as somewhat of a surprise to many. GDL Management Group, a real-estate investment trust (Reit), floated at an initial share price of €134.50, giving it a market value of €134.5 million at the end of August. However, its chief executive Kahlil de Burca told The Irish Times that the flotation at this time was merely to comply with Irish Reit rules, which require trusts to float within three years of being set up.
On the other hand, September saw the approval by ICG shareholders of a management buyout which will see that company head for the Euronext exit door in time.
Flotation on the stock exchange does have its attractions, including access to capital for ambitious growth-oriented companies, but it comes with some strings attached.
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“Most of Ireland’s largest and most successful companies listed on the Irish Stock Exchange at some point, from Smurfit Westrock to Kerry Group, Ryanair, CRH and Kingspan,” says Stephen Kane, head of corporate advisory, Goodbody. “Euronext Dublin continues to play an important role in providing growth capital. For the right business, a public listing can enhance visibility, support acquisition-led growth and broaden access to investors, provided management is prepared for the increased governance and reporting requirements.”
The stock market provides a permanent capital base for companies and an unrivalled depth of liquidity, he adds. “It does bring with it greater public scrutiny than private ownership. However, it can allow management and founders to retain greater influence, as ownership and governance are often more diversified than in a private equity-backed structure.”
An IPO is just one option open to capital-hungry businesses, according to Tom Noonan, director, corporate finance with PwC Ireland. “A flotation makes most sense when a business has reached sufficient scale and requires significant capital to fund its next stage of growth,” he points out. “It can also provide liquidity for existing shareholders and create a market for future fundraising.
“However, an IPO has increasingly become an option rather than a necessity. The availability of private equity, private credit and other institutional capital means companies can now remain private for considerably longer while still accessing substantial funding.”
The biggest competitor to the stock market today is arguably private capital, he continues. “Private equity can provide substantial growth funding, while the expansion of private credit allows companies to raise significant debt without entering public markets. Strategic investors are another option,” he notes. “Companies such as Stripe and Revolut demonstrate how very large businesses can remain private while accessing substantial capital. The traditional argument that ambitious companies need public markets to fund growth has therefore weakened considerably.”
Size matters when considering a flotation. “Larger, profitable businesses with strong management, predictable financial performance and a clear growth strategy are generally best suited,” says Noonan. “Scale is increasingly important, as smaller listed companies can struggle to attract analyst coverage, institutional investors and trading liquidity. Ireland does not necessarily have a shortage of companies capable of listing. The greater challenge is that many of our best growth businesses are acquired by larger, better capitalised international competitors before they reach the public markets.”
There are considerable advantages to a public listing, including access to a broad pool of capital to support acquisitions and long-term growth, according to Noonan. “Listed shares can also become an acquisition currency, allowing companies to fund transactions partly through equity. A listing can raise a company’s profile and gives shareholders a transparent route to realise value. For the right business, public markets can provide a powerful platform for growth, particularly where there is sufficient scale and liquidity to attract meaningful institutional investor interest.”
Kane agrees: “Public markets can also provide companies with access to follow-on capital long after the IPO, creating a funding platform for future acquisitions, expansion projects and strategic investments,” he says. “Public companies can also access a broader pool of capital, including both domestic and international institutional investors, which can support larger funding requirements over time.”
In addition, a public listing can provide an objective valuation benchmark, he adds. “Listed shares can also provide liquidity for existing shareholders over time, allowing founders, management and early investors to realise value without requiring a full sale of the business.”
A listing is not without disadvantages, however. “The costs of obtaining and maintaining a listing can be significant, alongside greater reporting, governance, regulatory requirements and public scrutiny,” Noonan points out. “Liquidity is also critical. Being listed does not automatically mean being liquid, particularly for smaller companies.
“Ireland has a relatively limited pool of actively traded companies and investors. Similar pressures are evident on AIM [Alternative Investment Market] in the UK. There is limited attraction in accepting public market scrutiny if shares trade infrequently or at a persistent valuation discount.”
Finally, access to capital is not the only factor to consider when deciding to go public, Kane advises. “Ultimately, the decision to list should be driven by strategy rather than funding alone. Public markets work best for businesses with clear growth ambitions, strong governance and where the increased profile, visibility and access to capital associated with a public listing support the company’s long-term objectives.”
