There are a number of reasons to take your company public. (The process of registering a company's shares of stock with the Securities and Exchange Commission and offering the stock for sale to the public). Going public has both benefits and added responsibilities for your company. Some of the most compelling advantages include:
Access to capital: A public offering of stock can vary from 500,000 to over 1 billion. In 2007, 1727 companies completed an IPO(Initial Public Offering). The total capital raised from these offerings was 23.6 billion. By offering stock for sale to the public a company can access a substantial source of corporate funding. If a company needs to raise capital, it can sell stock (equity) or it can it issue bonds(debt securities). An initial equity offering can bring immediate proceeds to a company. These funds may be used for a variety of purposes including; growth and expansion, retiring existing debt, corporate marketing and development, acquisition capital and corporate diversity. Through a public offering founders suffer less dilution when raising capital. Once public, a company's financing alternatives are increased. A publicly traded company can return to the public markets for additional capital via a bond or convertible bond issue or secondary equity offering. A public status can also provide favorable terms for alternative financing from public and private investors. In general, public companies have a higher valuation than private enterprises.
Liquidity: By going public, a company can create a market for its stock. In general, stock in a public company is much more liquid than stock in a private enterprise. Liquidity is created for the investors, institutions, founders, owners and venture capital professionals. Investors of the company may be able to buy or sell the stock more readily upon completion of the public offering. This liquidity can elevate the value of the corporation. The stock's liquidity is contingent on a variety of factors including, registration rights, lock-up restrictions and holding periods. A public company has greater opportunity to sell shares of stock to investors. Ownership of stock in a public company may help the company's principles to eliminate personal guarantees. Liquidity can also provide an investor or company owner an exit strategy, portfolio diversity, and flexibility of asset allocation.
Compensation: Many companies use stock and stock option plans to attract and retain talented employees. It is increasingly common to recruit and compensate executives with a combination of salary and stock. Stock in a public company can be issued as a performance based reward or incentive. This reward could be deemed desirable if the stock has a public market. Stock can be instrumental in attracting and keeping key personnel. Also, certain tax advantages are a consideration when issuing stock to an employee. Generally, capital gains taxes are lower than ordinary income taxes. Owners and employees may have specific restrictions relating to the liquidity and sale of the stock.
We are group of financial consultants specializing in assisting companies in going public through a reverse merger transaction.