Going public: what an SME needs

Going public is often seen as the natural goal of a company that has grown. In reality it is a specific strategic choice, with costs and obligations that not every SME has an interest in bearing. An IPO (Initial Public Offering) brings capital, visibility and liquidity for shareholders, but it also turns the business into a public company subject to continuous transparency. It is worth understanding what is really required before deciding whether the stock market is the right path, or whether alternatives are preferable.

What going public means

With an IPO the company offers its shares to the public and has them admitted to trading on a regulated market. In Switzerland the reference is SIX Swiss Exchange. For smaller companies there is Sparks, the segment designed for SMEs, with requirements calibrated to smaller entities than the main board. A listing can serve to raise capital (through the issue of new shares) and to give liquidity to existing shareholders (the secondary component).

The main requirements

The conditions differ between the main board and Sparks, but the pillars recur:

• Track record and accounts: a multi-year financial history, with statements prepared under a recognised accounting standard and audited.
• Capitalisation and free float: a minimum company value and a sufficient share of freely tradable shares, to ensure a liquid market.
• Legal form: typically an SA (AG) with capital and articles of association suited to a listed company.
• Prospectus: a complete, approved information document describing the business, risks, financial situation and structure of the offering.

Meeting the formal minimums is not enough: investors assess the equity story, prospective profitability and the quality of management.

Governance as a listed company

A listing imposes higher corporate governance standards:

• a structured board of directors, with an independent component;
• committees (audit, remuneration) and robust internal controls;
• a transparent remuneration policy, in line with the rules for listed companies;
• periodic financial reporting and rigorous handling of inside information.

For an SME used to quick, informal decisions, this is a profound cultural change: transparency becomes a permanent obligation, not an event.

The costs, often underestimated

An IPO carries two types of cost. The one-off costs of the placement: banks, legal and financial advisers, auditors, drafting the prospectus, marketing the offering. And the recurring costs of being a listed company: reporting, compliance, investor relations, reinforced control functions. For an SME these fixed annual costs can be significant relative to its size: they must be factored in before starting the process, because they do not end with the opening bell on day one.

The process, in brief

1. Feasibility assessment: is the company ready in terms of structure, accounts and governance?
2. Preparation: adapting the articles of association, accounting systems and controls, often over a path of 12-24 months.
3. Selection of advisers and definition of the offering structure.
4. Prospectus and approval by the competent authority.
5. Marketing and pricing of the offering to investors.
6. Admission and first trading, followed by the ongoing obligations.

The alternatives to consider

The stock market is not the only way to grow or provide liquidity:

• Private equity or growth capital rounds to finance expansion while staying private.
• Secondary sale to give partial liquidity to founders and early investors.
• Structured debt (financing, private bond placements) to grow without giving up equity.
• Trade sale as an exit alternative to the IPO.

Many SMEs obtain the benefits of the stock market — capital and discipline — without bearing its costs, by choosing instruments better suited to their size.

In summary

Going public makes sense when the company has scale, prospective profitability and an equity story the market rewards, and when founders and board are ready for continuous transparency. For many SMEs the right moment comes later than expected, or does not come at all: the choice should be made by comparing the IPO with the alternatives, not as an act of obligation.

Do you want to assess whether a listing is the right path for your business, or whether an alternative is preferable? SIH ONE’s capital division analyses feasibility and prepares the path to market.