Advantages of Going Public

Some major reasons of taking your company public is the fact that raising capital for your company gets simpler, an increase in your valuation, & the ability to make use of stock as money. Other factors would include liquidity for shareholders, status & visibility to customers, incentives using stock options to recruit top level employees, & increased wealth.

In this day in age where lending markets are tight, private companies have looked towards the public markets for help to raise money. Becoming a public company gives investors more confidence in investing in your company. Having a public stock cost gives you a benchmark to raise capital. There's some public companies that offer investors a chance to buy stock directly from the company at a discount to the public trading cost in a private placement. Usually investors can not sell these securities for year. This process will give the investor an incentive to invest. Capital raised can be used for growth & expansion, retiring existing debt, promotion, & most importantly acquisition capital. A public company can go to the public markets for capital with a stock or bond issue & may also convert debt to equity.

Two times a company is public & the creation of the marketplace for the stock has been established, the stock could be regarded as money when purchasing other businesses & assets. A public companies increase in valuation can lead to a variety of opportunities including mergers & acquisitions. Because of disclosure requirements from the SEC the public will have more confidence in the annual reports of the company. Market value of a public company is usually substantially higher than a private company with a similar structure in the exact same industry. Taking a private company public usually ends in a substantial increase in value to the owners. Public companies can sell 20-25 times their net earnings where the same company that is private will sell for 4-6 times their net earnings.

Going public gives the company a chance to generate a market for the stock, giving the company a greater opportunity to sell shares to investors. Stock in a public company has more liquidity than a private enterprise. Most times, institutional investors & venture capital firms will need a company to go public before committing money. The reason for this is the investors know they have an exit strategy. Liquidity is of the main reasons why public companies are usually valued a lot over a private enterprise.

Although there's lots of advantages of an IPO & going public, it is not for everyone. must be prepared to deal with all the red tape the market has in store for you. Going public process can be confusing sometimes so try to find an experienced consultant that can guide you throughout the process.

Another major advantage of going public is the availability to make use of stock & options as an incentive to attract & retain important employees. There's positive tax advantages as well when thinking about issuing stock to an worker. Stock compensation can be a way of connecting an employee's financial future to the company's success. Last but not least of the key benefits of a public offering is the stock will become liquid, offering the founders financial independence. This might be a substantial financial significance. It can also increase the personal net worth of shareholders, even in the event that they do not recognize immediate profits. Publicly traded stocks can be used as collateral or as money to buy other assets.