Development strategy in Public limited company, special is Listed Companies are complex than other companies. Because these companies have to solve dynamics and interests between three main of partners in the company as: the board, the existing shareholders and investors.
With companies that are not Public Limited Company, development strategies often only consider business factors, ie brand, position, capacity, competition, industry prospects ... because these companies mostly have only a owner, so it may decide everything easy. However, with Public limited company, special are companies listing shares on the stock market, the percentage of ownership in the company, the company's outlook will determine the benefits and motivation of the three partners on the development strategy for the company.
Executive board includes members of the control broad and management. They are driven and controlled company, but in listed companies, their percentage of ownership is often not too large. Existing shareholders are funded in the past for companies. Investors are willing or not willing to put more capital into the company. Harmony of motivation and benefits of these three partnerships have meaning decide to the development of a public company.
Do not want to develop for fear of losing control, in many companies have potential projects such as real estate, ... Raising new capital for these companies is not difficult, but leadership does not do it because they fear reduce ownership rate lead to reduce in corporate control. So they try to borrow to the maximum. This makes damage to the interests of other shareholders in the company.
Conflicts between the old shareholders and new shareholders. For example, James Kwak showed summarize sales of company in U.S such as: Thomas H. Lee Partners (THL) spend $ 327m buy up Simmons in 2003 and owns 100% of this company. To 2004, Simmons issued $ 137m bonds and used this money to pay the dividend for THL. Until 2007, Simmons continued to issue $ 300m bonds and pay to $ 238m for THL. Thus THL spend $ 327m and was received $ 375ms, and then Simmons declared bankruptcy. Obviously after the sale of Simmons, the creditors shared only with together all remains, but cannot constrain THL have to compensate losses. Anyway Simmons is a limited company so its owner (THL) is not responsible for the outside book of the Simmons.
Price of capital issue: Issuing additional shares to more capital is matter of survival of listed companies. Normally, the board wanted to issued high price to earn money without pressure EPS (earnings per share) when the stock was "diluted". However, large shareholders may not want to issue shares with high price because it depends on shareholders have to put more money to buy more. Also, only small shareholders to buy at low prices to get a feel "benefit."
Shareholder structure and stock price, Not only the business results of companies, but also shareholder structure affects to stock prices. Now, when many shareholder want short-term business in Stock Exchange, that make conflict between shareholders or big group shareholder can effect to managers of distributive interest between terms, declare information … direction benefits for their trading. That can make conflict with benefits of other shareholders and investor.
How to harmonize and develop? Many businesses have not realized the complexity of the problem development strategy with harmony and interests of the parties as stated. Then, management or major shareholders need consultancy firms have experience to consult about issues interest harmony of the parties. This is a condition prerequisite for the development of public limited companies or listed companies.
No comments:
Post a Comment