The advantages of going public are very large and include the following reasons:
- Access To Capital
- Liquidity
- Compensation
- Mergers & Acquisitions
- Market Awareness
Access to Capital
If a company needs to raise capital, it can sell stock (equity) or it can issue debt securities which potentially 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.
Once public, a company’s financing alternatives and opportunities expand and a publicly traded company can return to the public markets for additional capital via a bond or convertible bond issue or secondary equity offerings. A public status can also provide favorable terms for alternative financing from public and private investors.
Generally, public companies have a higher valuation than private enterprises.
Liquidity
By going public, a company has greater opportunities to sell shares of is by creation of a market for for buyers and sellers. Stock in a public company has the potential to create an active liquid market and is infinitely more liquid than stock in a private enterprise. Liquidity is created for the investors, institutions, founders, owners and venture capital professionals and public company investors may be able to buy or sell stock more readily upon completion of a public offering.
This liquidity can elevate the value of the corporation, but is contingent on a variety of factors including registration rights, lock-up restrictions and holding periods. A public company may use stock for a variety of corporate purposes, including payment to consultants, payment for services, financings and to pay the company’s principles to eliminate personal guarantees made on behalf of the public company.
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 is more 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.
Because a public offering can create a market for the company’s stock and result in liquidity, the company’s employees may benefit. A stock plan for employees demonstrates corporate goodwill and allows employees to become partial owners in the company where they work.
An allocation of ownership or division of equity can lead to increased productivity, morale and loyalty. This type of compensation is a way of connecting an employee’s financial future to the company’s success.
Mergers & Acquisitions
Once a company is public and the market for its stock is established, the stock can be considered as valuable as cash when acquiring other businesses. A successful IPO can have a dramatic effect on a company’s profile, perceived competitiveness and stability. This perception can lead to expanded business relationships and added confidence in the consumer.
A successful public offering will increase a company’s valuation leading to a variety of opportunities for mergers and acquisitions. With the ability to raise additional capital by returning to the public markets for another offering, a public company is better able to finance a cash acquisition.
A public company also has the advantage of using the market’s valuation when exchanging stock in an acquisition. SEC disclosure requirements offer merger candidates the assurance of shareholder scrutiny and accurate reporting of the financial condition or solvency of the public company. Using stock to acquire another company can be easier and less expensive than other methods.
Additionally, many private firms do not appear on the radar screen of potential acquirers. Being public makes it easier for other companies to notice and evaluate the firm for potential synergies.
Choosing The Right Firm
If you choose to go public however, you need to be sure that you are advised by the right team of consultants. Allow us to find and designate the right path for you to take.
Any one of the following options can take you and your corporation public. Only your specific goals and needs will dictate the method you choose.
Let us show you the right method of accessing capital, liquidity, company marketing, publicity and the prestige of going public.
- Listed Pink Sheets via OTC market filings and 15c2-11
- Listed on the OTCBB or OTCQB, OTC markets, 15c2-11 or SEC registration statement filing
- 15c2-11 ready504 to the Pink Sheets
These transactions involve a comprehensive series of related transactions, a skilled group of experts and service providers such as investment bankers, attorneys, public accountants, transfer agents, investor relations professionals and investors. Rainmaker Group Consulting and partner firms can take a lead role in managing all of these constituencies in order to effectively and efficiently execute the transaction from start to finish.
*Additional Information:
Listing Requirements to Go Public
Disclaimer
Emerging Markets Consulting, llc. are not registered investment advisors or registered securities broker dealers nor do they act in the capacity of an investment adviser or broker dealer in any way. No information contained within this website or Information distributed to the investment community should be construed as investment advice or as a solicitation to offer, purchase or sell securities.