There are several factors to consider before taking your company public.
On the upside, going public can provide much-needed capital to help you expand your business. It can also raise your profile and increase awareness of your brand.
On the downside, going public can be a complex and time-consuming process. It can also expose your business to greater scrutiny from shareholders, analysts and the media.
Here’s a closer look at the pros and cons of taking your company public:
What is an IPO?
An Initial Public Offering (IPO) is when a company first sells shares to the public, typically done to raise capital for the company. The company will work with an investment bank to determine how many shares to sell and at a certain price. After the IPO, the company will be listed on a stock exchange and can be bought and sold by investors.
The pros of IPOs
Here are the pros of taking your company public:
Access to capital
One of the most significant advantages of going public is that it gives you access to large amounts of capital, which companies can use to fund expansion plans, research and development projects, or acquisitions. Going public can also make getting loans from banks and other financial institutions more accessible.
Going public can help raise your company’s profile and increase your brand awareness, which can be beneficial if you’re looking to break into new markets or attract new customers. Going public can also help you to attract and retain top talent.
Another advantage of going public is that it gives shareholders the ability to sell their shares more efficiently, which can be helpful if you need to raise cash quickly or if you’re looking to exit the business entirely. It’s also worth noting that being a publicly-traded company usually makes it easier to raise capital in the future.
The cons of IPOs
Here are the cons of taking your company public:
Complexity and cost
Going public can be a complex and time-consuming process. You’ll need to hire investment bankers, accountants, and lawyers to help with the listing process, which can be costly, and there’s no guarantee that your company will list on a stock exchange or that people will buy shares of your company.
As a publicly-traded company, you’ll be under more scrutiny from shareholders, analysts, and the media, putting pressure on management to deliver short-term results rather than long-term value. It can also make it difficult to make strategic decisions that may not pay off immediately.
Loss of control
Another downside of going public is losing some control over your company. For example, you may have to answer to shareholders or government regulators.
Going public can be a complex and time-consuming process. You’ll need to hire investment bankers, accountants and lawyers to help you with the paperwork and meet all the regulatory requirements, and this can all be quite costly.
You’ll be under pressure to deliver quarterly profits as a publicly-traded company, which can lead to short-term thinking and an emphasis on meeting Wall Street’s expectations rather than long-term strategic planning. There’s also the risk that activist shareholders could try to take control of your company if they’re unhappy with its performance.
Difficult to keep confidential information
As a public company, you’ll be under greater scrutiny from analysts, the media and shareholders, making it difficult to keep confidential information. It can also make it hard to make long-term decisions that may not pay off immediately.
The bottom line
There are pros and cons to taking your company public, and you will need to weigh up all the factors and strategies before making a decision. If you decide to go public, make sure you’re prepared for the increased scrutiny and rules and regulations of being a public company and using a reputable and reliable online broker such as Saxo Hong Kong.