Why Go Public?

gnbvi68 By gnbvi68, 3rd Jun 2013 | Follow this author | RSS Feed
Posted in Wikinut>Business>Business Opportunities

Shares even if the public shareholders do not realize immediate profits, publicly traded can be used as collateral to secure loans.

Why To Go Public Shares?

Access to Capital A public offering of stock can vary from $ 500,000 to over $ 1 billion. In 1999, 544 companies completed an IPO (Initial Public Offering). Capital raised from this offering were $ 23.6 billion. By offering stock for sale to the public companies can access funding large companies.

If the company needs to raise capital, can sell stock (equity) or it can issue bonds (debt securities). Initial equity offering can bring immediate results to the company. These funds can be used for various purposes including; growth and expansion, retiring existing debt, corporate marketing and development, capital acquisition and diversity of the company.

Once public, corporate financing alternatives increases. A publicly traded company can return to the public markets for additional capital through the issuance of bonds or convertible bonds or secondary equity offerings. A common status may also be advantageous to provide alternative financing from public and private investors.

In general, public companies have higher valuations than private companies.

Liquidity To sell shares of a private compnay, shareholders have to find other individuals who are interested in owning shares. It is very difficult, especially for a minority position.

By going public, the company created a market for the stock in which buyers and sellers participate. Generally, shares in a public company is much more liquid than shares in private companies. Liquidity is made to the investors, institutions, founders, owners and venture capital professionals. Investors of the company may be able to buy or sell shares more easily after the completion of the public offering.

This liquidity can increase the value of the company. Liquidity of the stock depends on various factors including, registration rights, lock-up restrictions and holding periods. A public company that has a greater chance of selling shares to investors. Ownership of shares in a public company can help enterprise principles to eliminate personal guarantees.

Liquidity can also provide the investor or company owner an exit strategy, portfolio diversity, and flexibility of asset allocation.

Many companies use stock compensation 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. Shares in a public company can be issued as a reward or incentive-based performance.

This award is more desirable if the stock has a public market. Shares may play a role in attracting and retaining key employees. Also, certain tax advantages when issuing consideration shares to the employees. Generally, capital gains taxes are lower than ordinary income tax. Owners and employees may have specific restrictions related to the liquidity and the sale of shares.

A public offering can create a market for company stock. This market can result in liquidity and reward for the company's employees. A stock plan for employees of the corporation would indicate that either allow employees to become partial owners of the company they work for.

Allocation of ownership or division of equity can lead to increased, the spirit of productivity and loyalty. Type of compensation is a way to connect employees to the future financial success of the company.

A prestige public offering can help companies gain prestige by creating a perception of stability. Founder of a company, co-founder and manager of obtaining a large number of personal prestige from being associated with a client that goes public. Prestige can be very helpful in recruiting key employees and marketing products and services.

When sharing ownership with the public, you spread the reputation of the company and increase the chances of its Business. By selling shares in the stock of your company can gain additional exposure and become better known. This exposure can lead to improved recognition and business operations.

Public status can be used when marketing goods and services. Often a company's suppliers and consumers become shareholders, which may encourage continued or increased business. In this example, a public company can have a competitive advantage over a private company. IPO can indicate credibility for corporate customers, which can lead to increased sales and greater company profile.

Once public, lenders and suppliers may perceive the company as a safer credit risk, increase opportunities for favorable financing terms. Also, a public offering can create publicity effective when marketing your company.

Image of public companies tend to have a higher profile than the private companies. This is important in an industry where success requires customers and suppliers to make long-term commitments.

For example, the software requires a significant investment in training and the manager did not want to buy software from a company that may not be around for future upgrades, improvements, bug fixes, etc. Indeed, suppliers and customers' perceptions of the company's success is often a prediction fulfilled.

Publicity A public offering of stock can generate prestige, publicity and visibility, which is effective when marketing your company. Public companies are more likely to receive primary attention, magazines newspapers and magazines from a private company.

A strong ad campaign coupled with media initiatives can potentially increase sales and revenue. The publicity received from the public offering encourages new business development and strategic alliances. Analyst reports and daily stock market tables contribute to public awareness and consumer finance.

A successful public offering can get your company's story out to the world and open up opportunities for investors who are not suitable for an investment in a private company. Publicity that a public offering brings can attract the attention of potential partners or merger candidates.

Because of the financial condition of a public company subject to the supervision of the SEC reporting requirements, existing business relationship or future strengthened.

Mergers & Acquisitions After a public company and established market for the stock, the stock can be considered as valuable as cash when acquiring other businesses. A successful IPO can have a dramatic effect on the company's profile, perceived competitiveness and stability. This perception could lead to expanded business relationships and added confidence in the consumer.

A valuation of a private company often reflects illiquidity. A successful public offering will increase the company's valuation leading to a variety of opportunities for mergers and acquisitions. With the ability to raise additional capital to return to the public markets for another offering, a public company is better able to finance the acquisition of cash.

A public company also has the advantage of using market valuation when exchanging stock in an acquisition. SEC disclosure requirements offer merger candidates and shareholder oversight guarantee accurate reporting of the financial condition or solvency of the public company. Using stock to acquire another company can be easier and cheaper than other methods.

In addition, many private companies that do not appear on the radar screen of potential acquirers. Being public makes it easier for other companies to look at and evaluate the company for potential synergies.

Exit Strategy One of the important benefits of a public offering is the fact that the company's stock eventually becomes liquid, offering reward and financial freedom for the founders and employees.

A public market for the shares also provide a potential exit strategy and liquidity to investors. Psychological sense of financial success could be additional benefits go public. A public offering could increase net worth private shareholder company.

Shares even if the public shareholders do not realize immediate profits, publicly traded can be used as collateral to secure loans.

Future Capital Company Grows constantly need access to new capital. Going public is one way to get that capital, but it takes time and money - quite a lot of good! Public will offer several strategic advantages:

Almost all companies go public primarily because they need the money. All other reasons are of secondary importance. IPO (firm-commitment) typical raises $ 20-40M, but offerings of $ 100 million are not uncommon. This can vary widely by industry.

Once the public, companies can easily return to the public markets to raise more money. Typically, about one-third of all IPO issuers return to the public markets within 5 years to issue a "seasoned equity offering" (the term used to indicate secondary shares sold by insiders rather than by the company). They were again raised about three times as much capital in their seasoned equity offers as they raised in their IPO.


Business Ethics, Business Law, Business Management, Business Online, Business Opportunities, Business Opportunity, Business Owner, Business Plan, Business Planning Process, Business Startup, Business Study, Business-To-Business Services, Businesses

Meet the author

author avatar gnbvi68
I am from India done my MBA in Pune I am really passionate about writing and an freelancer too.I am married and have two kids.

Share this page

moderator Steve Kinsman moderated this page.
If you have any complaints about this content, please let us know


Add a comment
Can't login?