Going Public

Going public can do great things for a company. For instance it can help meet with the corporate financial and growth objectives quickly. In the best of Inc. guide to finding capital makes a statement about top managers of a company, who had acquired stock at 25cents a share early on, saw the value of their holdings increase more than 3000 percent. Unbelievable right? So should a company go public? Maybe this and many other examples can serve us as a guide for many companies wanting to go public. Companies begin thinking about going public because they believe that selling shares on the open market would reduce their debt so they can obtain further conventional financing for growth.

When is the right time to go public for a company? Unfortunately going public is an amazingly complex process. Moreover, a company can’t go ahead until done with all the paperwork and obtain the Securities and Exchange Commission approval. One of the challenges a company face is to find an underwriter which is an investment banker who would market the stock. Consequently, the underwriter needs to have the ability in case the stock does not sell to purchase the remaining shares that the public doesn’t.

Going public is a realistic way of reducing debt and making stocks more valuable. So if a company wants to multiply the value of its equity there is no other good idea to go public.

What if a company doesn’t demonstrate to have enough earnings per year? Because companies need to have enough earnings to be able to sell enough shares to the public to create liquidity and to command a high enough price per share otherwise the offering would be classify as junky.

Going public can cost lots of money for a company. There are many risks that a company takes when going public. For instance, the underwriter’s fee is the largest expense because is generally 7 to 10 percent of the total price of the shares. There has to be so much chemistry between the company and the underwriter because its...