Going Public

The private company which has gone public obtains the benefits of public trading of its securities, namely:

• Higher Market Value. The value of a public company is often substantially higher than a private company with the same structure in the same industry.
• A Benchmark is established. The public trading price of the public company's securities serves as a benchmark for the offer price of a subsequent public or private securities offering.
• Acquisitions can be made with stock (or a combination of cash and stock) since publicly traded stock is viewed as currency for mergers and acquisitions.
• Stock Incentive Plans can be offered to officers, directors, employees and consultants, enabling a small company to attract and retain exceptional talent.
• Financing Options expand significantly. Capital is easier to raise for public companies because the stock has market value and can be traded, providing investors with a degree of liquidity.

A public company with its broad equity base, has many more opportunities for obtaining financing for future projects through convertible debentures, secured debt with equity warrants etc. Improving the company’s, debt to equity ratio, enables the company to borrow at lower interest rates from traditional institutions.

There are also certain perceived disadvantages in being a reporting public company. These are commonly thought to include the following:

• requirement for audited financial statements
• required publication of corporate information
• required filings of periodic and episodic reports with the Securities and Exchange Commission
• increased rules and regulations governing management
• ongoing demands on management in the area of shareholder relations.

It is worth noting that going public can be a part of a retirement strategy for business owners.

• Considerable tax advantages are available, with proper exit strategies
  
• The newly created value can become part of an estate providing value not only for the founders, but for generations to come.

What Companies Should Consider Going Public?

Companies with the greatest potential for going public and raising equity capital of $2 to $10 million are those that have national markets for their products and can generate annual sales of at least $20 million by the end of their 3rd year. In addition, a public company should have a patented or proprietary technology or specialty niche market.

After the Company Goes Public

It is essential that public companies, especially newly public companies, actively maintain and manage a financial communications program.

A newly formed public company would be well-advised to invest in consulting services, to plan and execute a strategy for building and maintaining an active interest in the company within the financial community.

Consultants are available to assist the public corporation in providing corporate relations services intended to increase awareness of the company with stock brokers, individual investors, and small institutions.