Listed: Defintion, How Listing of a Company Work, and Example (2024)

What Is "Listed"?

A listed company issues shares of its stock for trading on a stock exchange. If a company is listed in the U.S., it has met the requirements of the Securities and Exchange Commission (SEC) for selling shares to the public and has been accepted for trading on an exchange such as the New York Stock Exchange. It is a public company.

Companies that are listed are required to submit quarterly financial statements to the SEC and to their shareholders.

Understanding the Term Listed

A listed company is a public company. It has issued shares of its stock through an exchange, with each share representing a sliver of ownership of the company. Those shares can then be bought and sold by investors, rising or falling in value according to demand.

A company must apply to an exchange to be listed. Each exchange sets its own requirements, which typically include minimum levels of cash flow and company assets. The company also must adhere to the exchange's standards of corporate governance.

Since they are public companies, all listed companies are subject to regulation by the Securities and Exchange Commission. Among other things, this means that the company must publish quarterly and annual financial reports.

In order to be listed, a company must meet the qualifications set by one of the stock exchanges. Once a company is listed, it must continue to meet those qualifications or risk being delisted.

Benefits of Being Listed

Companies list on an exchange in order to raise cash. The sale of stock on the open market is one way to raise a great deal of money fast.

In general, companies that want to grow and expand have a few ways to raise the money:

• They can borrow the money and pay interest on it.
• They can seek private investors with deep pockets, who will expect a measure of control in return for their investment.
• They can go public and raise money through the sale of shares in the company.

Of course, individual investors also expect to exert a measure of control over companies whose stock they own. Ownership of a single share of common stock gives an investor the right to attend a company's annual meeting and vote on the issues raised there.

Other Benefits

Listing on a stock exchange gives a company more than access to a piggy bank. It can greatly enhance the visibility of the company by drawing the attention of investors and the financial media. It also gives a company a way to reward its employees, through stock options.

There are benefits to investors as well. The requirements of the exchanges and the regulations of the SEC together offer a degree of transparency and accountability.

In their modern form, the exchanges also offer great liquidity and ease of use to stock investors.

Initial Public Offering (IPO)

Many ambitious young companies set "going public" as their first major goal. The process toward launching an initial public offering (IPO) is long and arduous and includes attracting early private investors, building, refining, and testing the product, and creating a business plan.

The company must prepare a package of financial statements to submit to the Securities & Exchange Commission for its approval. Then the company's founders go on the road to sell their plan to institutional investors and the financial media.

Once a company has been accepted for listing on an exchange, it can set a share price and a date for its IPO.

If the IPO is successful, the company gets a big wad of cash to invest in its expansion and to reward its founders and early investors.

Once the company is established it can issue new rounds of stock shares from time to time. This is usually done to raise money for a specific project. It can't be done too often, though, without objections from existing shareholders who don't want the value of their shares diluted.

Listed vs. Unlisted Companies

Some of the biggest brands in America are produced by companies that are privately owned rather than publicly listed.

Some companies bounce back and forth between listed and privately-owned status, typically as a result of a leveraged buyout by a private equity firm. Burger King and the Jo-Anne Stores chain are examples of companies that have been listed and unlisted.

Some very large companies have never been listed. The largest privately-owned companies in America include Cargill, Koch Industries, and the Publix supermarket chain.

Requirements to be Listed on the Nasdaq Exchange

The Nasdaq is a global online stock exchange known for listing some of America's largest technology companies.

A company can qualify for listing on the Nasdaq if it meets the requirements outlined in its 19-page "Initial Listing Guide." Those requirements include:

• The company must have a minimum of 1,000,000 publicly traded shares upon listing, excluding those held by officers, directors, or anybeneficial ownersof more than 10%of the company.
• The regularbid priceat the time of listing must be at least $4,and there must be at least threemarket makersfor the stock. Alternatively, the company may qualify if it has aclosing price of $3 or $2, depending on other requirements.
• The company must abide by Nasdaq corporate governance rules.
• Companies must have a market value of publicly held stock of $15,000,000 (or $5,000,000 if using the net income standard).

The Nasdaq also requires companies tomeet all of the criteria under at least one of the following standards:

• Earnings standard:The company must have aggregate pre-tax earnings in the prior three years of at least $10 million, in the prior two years of at least $2 million, and no singleyear in the prior three years can have anet loss.
• Capitalization with cash flow:The company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years with no negative cash flow in any of those three years. In addition, the company's average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previousfiscal yearmust be a minimum of $110 million.
• Capitalization with revenue:Companies can be removed from the cash flow requirement of the second standardif theiraverage market capitalization over the past 12 months is at least $850 millionand revenues over the prior fiscal year are at least $90 million.
• Assets with equity:Companies can eliminate the cash flow and revenue requirements, and decrease their marketing capitalization requirements to $160 million if their assets total at least $80 million and their stockholders' equity is at least $55 million.

Requirements to be Listed on the New York Stock Exchange (NYSE)

The New York Stock Exchange is the world's largest stock exchange and the oldest in America, having been founded in 1792.

The NYSE requires applicants to meet any one of several financial standards. It must meet a set minimum for pre-tax income, global market capitalization, shareholders' equity, or market value of outstanding shares.

It also has what it calls distribution standards, with minimums set for share price and trading volume, among other factors.

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