Initial Public Offering: Why Stock Market Success Takes Years

An initial public offering (IPO) is a radiant event. The debuting company’s top management and investors join hands and ring the opening bell together. The media report on the happening, and trading gets underway. An IPO gets celebrated as a major milestone in the life of a company, and rightly so. But the really great success stories on the stock market aren’t written in a day, but over a period of years or even decades.

An IPO is just the beginning, as illustrated by the stories of the two companies Emmi and Telefónica. Emmi, the largest dairy company in Switzerland, has been celebrating its 20th anniversary on SIX Swiss Exchange in 2024, and Telefónica, Spain’s largest telecommunications company, has been celebrating its centennial on the Spanish stock exchange around the same time. These two examples testify to how a long-term listing on a stock exchange helps a company grow and expand over the years.

Emmi is the leading manufacturer of dairy products in Switzerland and employs around 12,000 workers worldwide. Headquartered in Lucerne, the company sells its products in over 60 countries around the world. The company’s history began in 1907 when 62 dairy farming cooperatives founded the Central Switzerland Milk Association, the predecessor organization to today’s Emmi. The company went public on the Swiss stock exchange in 2004 and has since developed into a global player in the dairy industry.

Telefónica is a world-leading telecommunications company headquartered in Madrid, Spain. It was founded in 1924 and has since developed into one of the world’s largest providers of mobile telephony, broadband, and digital services. Telefónica operates in Europe and Latin America and serves millions of customers worldwide. The company has been listed on the Spanish stock exchange for a century and is considered a cornerstone of the global telecommunications industry.

Let’s start with the example of Emmi. The dairy group has expanded vigorously internationally over the last two decades. It has acquired more than 40 companies over the last 20 years, the vast majority of them outside Switzerland. Today Emmi earns around 60% of its sales revenue abroad and manufactures a large part of its products locally. “The capital raised through the IPO and the boosted public awareness of our brand in and outside Switzerland have enabled us to achieve our growth plans,” Emmi CFO Oliver Wasem says.

Telefónica has a similar story. The telecom company likewise has expanded tremendously over the years, branching out from Spain to Brazil, Peru, Germany, and the Netherlands. Commenting on the growth, Adrian Zunzunegui, the director of global investor relations at Telefónica, says: “The exchange listing helped us to finance our international expansion plans. The additional credibility and trustworthiness for our shareholders, customers, suppliers, and financial institutions were crucial to our growth.”

When people talk about IPOs, they primarily think about the capital raised by going public. That’s certainly important, and for many companies financing is the main motive for an IPO. But an IPO also brings many other benefits. A longstanding listing on a reputable stock exchange signals trustworthiness and financial stability to the investor community, customers, and business partners. Companies that have withstood market fluctuations and comply with stock exchange regulations are considered reliable and well managed. Telefónica is a prime example of this. The company has successfully navigated through numerous crises in history such as the Wall Street crash of 1929, the Spanish civil war in the 1930s, World War II, and the 2008 financial crisis.

Another non-financial factor is visibility. “An exchange-listed company can present itself better to the public. We not only disclose our financial figures, but are also able to explain our strategy,” Emmi CFO Wasem says. When a corporation is listed on a stock exchange, the public becomes more interested in the company. That goes for the investor community, but also for the media that disseminate information to the general public.

Last but not least, the possibility of raising capital isn’t confined to an IPO. An exchange-listed company can raise capital quickly and easily at any time by selling new shares to investors. Telefónica has done that many times in its recent past, such as in 2001 to finance its expansion into Latin America and in 2010 to fund its acquisition of Vivo, the largest mobile phone service provider in Brazil.

The benefits of an exchange listing extend far beyond an IPO. Companies like Emmi and Telefónica have demonstrated over decades that a longstanding presence on the stock market facilitates growth and stability. The resulting credibility in the investor community, the increased brand awareness, and the possibility to procure capital at any time make a stock exchange listing a strategic advantage for companies of all sizes. Companies that successfully face the challenges of the markets and consistently operate transparently and in a trustworthy manner secure not only financial resources, but also gain acknowledgment and trust from their stakeholders. A stock exchange listing is an investment in the future – with success stories that get written over decades.