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Jeffrey Veen

Investment Dictionary

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Floatation means going public through an IPO. If companies go public they have to get listed their shares on some stock exchange. Each company’s may choose any stock exchange, but normally smaller companies try to choose local investment market. 


Flotation helps for the company to raise capital and increases stock liquidity for the shareholders. In other hand floatation also creates additional costs that may be too high for very small companies. The more shares company sells to the market the higher is free float.


The pros of floatation:

  • Company may raise capital at better conditions than closely held company.
  • It increases the market value of a company.
  • Higher transparency builds trust among clients, suppliers and labor.
  • Company’s owners may sell their shares more quickly if there would be a need for that.


Of course every company that decides to get listed on stock exchange has to sacrifice some privacy and will have to pay fees for the listings. That’s why not every company wants to get their shares included in active stock market; and especially it might be expensive for very small companies. 


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