Here we tell you everything you need to know about listed companies, such as what they are and what requirements listed companies must meet. 

What is a listed company?

A listed company is a company whose shares are listed and traded on a stock exchange, such as Nasdaq. This means that the shares are available to the public, and anyone with a share account can buy and sell the company's shares through banks and online platforms during stock exchange trading hours. Listed companies must comply with specific rules on transparency and financial reporting, giving investors access to important information about the company's operations and performance. 

What are the requirements for listed companies?

Listed companies must meet the requirements we describe below. 

Pre-listing requirements

For a company to be listed on a stock exchange, it must meet some or all of the requirements described below. Which requirements must be met and how these requirements are structured depends on the stock exchange on which the company wants to be listed.

 

• The company must have an equity capital that meets the minimum requirements of the relevant exchange or marketplace.
• The company should often meet certain profitability and turnover requirements, but for some fast-growing companies the profitability requirements can be flexible.
• The company should have an established business and a 2-3 year financial history.
• The board and management must have the experience and skills to run a listed company. The company must also have procedures to ensure accurate and clear disclosure to the market.
• The company must present a prospectus, which contains detailed information on its business concept, finances and activities. Smaller companies may sometimes present a company description, which is a simplified version of the prospectus.
• The company has to undergo a due diligence process that examines legal, financial and tax aspects, among others. This review is often carried out by external advisors and summarized in a report.
• The company must meet the dispersion requirement, which means that a certain percentage of the shares (usually 10-25 %) must be owned by the public.

Post-listing requirements

Listed companies must meet several important requirements to ensure market confidence and compliance:

• The company must regularly submit financial reports, including quarterly reports and an annual report containing, inter alia, the profit and loss account, the balance sheet, the directors' report and, where appropriate, the auditors' report.
• The company is obliged to disclose promptly any event that could affect the share price, such as major acquisitions, changes in management or new customer contracts. This disclosure obligation is governed by EU Market Abuse Regulation (MAR).
• The company shall have rules and procedures to prevent insider trading, including keeping insider lists and imposing confidentiality periods for insiders.
• The stock exchange monitors listed companies to ensure compliance. If a company breaks the rules, it can face sanctions such as fines, warnings or, in serious cases, delisting from the stock exchange.

Advantages of being a listed company

When a company is listed on the stock exchange, it enjoys the following benefits. 

It will be easier to raise new capital

Many companies choose to go public to facilitate fundraising. Genome new issues the company can issue more shares, raising capital for growth and investment.  

Making it easier to trade company shares

Listing on a major stock exchange makes the stock more accessible to investors and increases liquidity, which facilitates ownership changes and stabilizes the share price. Increased ownership diversification can also improve brand awareness. 

Listed shares can be held in investment savings accounts

Only listed shares can be placed in the ISK, attracting more investors who benefit from ISK tax advantages.

The company gets a seal of approval

Listing means that the company meets strict transparency and financial reporting requirements, which can improve public and investor confidence.

Getting a bank loan just got easier

The transparency requirement for listed companies makes it easier for banks to analyze the company's financial health, which can make it easier for the company to get loans. However, the company's finances and creditworthiness are still crucial. 

Companies can become more attractive to workers

Listed companies can offer share-based benefit programs, such as stock option plans, which make them more attractive as an employer and link employee compensation to the success of the company. However, this is something that even unlisted companies can offer their employees, but it will be safer for the employee if the company is listed. 

Disadvantages of being a listed company

Below we explain the disadvantages of being a listed company. 

Increased costs 

A listing increases the costs of auditing, ongoing reporting and legal advice, among other things. This is due to the strict transparency requirements imposed on listed companies, which require resources to ensure compliance. 

Increased control and transparency requirements

Listed companies must publish key documents, such as financial reports and strategic decisions, making strategically sensitive information available to investors, media, analysts - and competitors. 

Focus on short-term profitability

Listed companies may feel pressure from shareholders to show improved results every quarter. This can lead the company to prioritize short-term profitability over long-term goals, such as growth and innovation, which can negatively affect the company's performance in the long run. 

Risk of hostile takeovers exists

Because their shares are publicly traded, listed companies are vulnerable to hostile takeovers. If one party buys a large percentage of the shares, they can take control of the company, even against the will of the management. 

Frequently asked questions

What is the difference between a listed and unlisted company?

A listed company has shares that are publicly available and traded on a stock exchange, such as Nasdaq. This means that the public can freely buy and sell shares in the company, creating a liquid market. Listed companies must also follow strict rules on transparency and reporting to protect investors.

Unlisted companies are not available on public stock markets. Nevertheless, investors can buy shares in unlisted companies, often through private transactions or specific trading platforms. Trading in unlisted shares is generally less liquid, and companies do not have the same public reporting and transparency requirements, which means that investors have less insight into the company's finances and performance.

What is the disclosure obligation for a listed company?

The disclosure obligation for listed companies means that they must immediately disclose all events that may affect the share price, such as acquisitions, major contracts, changes in management and significant changes in the company's financial position. Listed companies must also provide regular financial reports, such as quarterly reports and annual reports, to give the market a continuous insight into their business.

This obligation is governed by the EU's Market Abuse Regulation (MAR), which requires all inside information to be disclosed in an accurate and fair manner to ensure transparency and equal treatment of investors.