Floating Your Company

6. Pricing

Pricing a new flotation is complicated. The price may continue to be a matter for negotiation between you and your corporate adviser or stockbroker right until the last minute.

6.1 Most companies are valued on their historical and expected future earnings.

• Your advisers will help put together projections of future earnings.
• You can choose whether or not your prospectus contains an earnings forecast (which you must be confident of meeting or exceeding).

6.2 Investors will pay more for shares in exciting businesses.

• Your company will be more valuable if it is a market leader in its sector. Or if it is involved in a growth or fashionable industry.

6.3 You may choose to sell for a lower price to ensure a successful flotation and provide a good after-market in the shares.

• If you plan future share issues it is important to keep investors keen.