Many entrepreneurs have preconceived notions about taking their company public, most of which are not accurate. Nine little known facts: 1. You do not need a brokerage firm or investment banking firm to take your company public. Many companies opt to go public through a direct public offering. In these registered public offerings, a private company follows the same rules and regulations that are followed by companies who go public with an investment banking firm. 2. You do not need to go public through a reverse merger. Many companies falsely believe that they are too small or are not interesting enough to go public so they decide to go public through a reverse merger transaction. The truth is that virtually any company can go public through a direct public offering. 3. You do not need to give up control of your company. Senior executives of small to medium size companies believe that they will lose control of their company during the process to become public. While there are additional constraints due to government regulations and investor demands, it is rare for a company to give up control. When companies do give up control during the initial public offering process, they always do so voluntarily as they have a choice not to proceed with the transaction. 4. You can significantly increase your personal wealth by going public. Going public is a great way to generate immense wealth. Private companies are often valued at far less than their publicly traded counterparts. The mere process of becoming public adds enormous value to the shares of any private business. 5. You can provide yourself and your investors with an exit strategy and liquidity. Companies go public for many reasons. One of the benefits of being public includes the fact that insiders and their investors can liquidate their holdings over time. 6. You can use newly issued stock to acquire other companies and grow your business. Many companies want to go public because they understand that issuing stock to acquire other companies is a tremendous advantage. What private company would not be interested in hearing an offer from a publicly traded company? 7. You can generally raise capital easier, faster and at a lower cost after going public. Investors have a natural preference to invest in publicly traded companies. As a result, they are more willing to invest in publicly traded companies. 8. You can issue stock options to attract and retain high quality employees and consultants. Smart and talented people are always hard to get. Public companies can effectively use stock options as a nice incentive that their private companies can not offer. 9. You do not need any minimum level of sales, profits or assets to become public. Many private companies think they need to achieve certain milestones to become publicly traded. The fact is: there are absolutely no sales, profit or asset requirements for a private company to go public. |
