Secret Tips on Whether or Not to Take your Company Public
Some businesses are doing much better as private companies even after years of being as public companies. But if you want to take your company public, you need to face complexities and challenges, but the process is not all that difficult. The advantages overweigh the disadvantages of going public.
Companies that want to go public mainly want to raise money as a lot of money can be raised from the general public through shares. Though it requires listing on a stock exchange, all public limited companies are liable to issue debentures, fixed deposits and convertible debenture to the public. The risk of ownership is also divided among the large group of share holders. It is important to spread the risk as the company grows as the original shareholders need cash from the profits along with retaining some percentage of the company.
Other Reasons for a Company Going Public
There are numerous reasons for a private company to go public. You can obtain finances from outside the banking or can reduce debt and the offering stock is an initial public offering which represents a milestone for many private owned companies. Taking the company public also reduces the overall cost of the capital which gives companies a solid standing while negotiating interest rates with the banks which is beneficial to reduce the interest cost on the debt which the company might have taken. It is prestigious to have stock publicly traded on stock exchange.
Many Internet start-ups had raised money through IPO’s without any plans on being profitable but still, there are companies like Domino’s Pizza and IKEA who prefer to remain private in order to avoid increased scrutiny and other disadvantages which the public traded stock entails.
Greater Credibility and Quick Share Transfer
Public companies have to disclose their audited statements of accounts and have to inform the regulatory bodies if any structural change is there. They have to hold a general meeting annually for all the shareholders. All these compliances though tedious still bring a great deal of credibility to the public limited company. Share holders of the public limited companies have the benefit of transferring their shares with great ease. You just need to file the share transfer form and share certificate to the buyer which is otherwise very tedious in other business structures.
If all the things are managed properly and public limited companies update themselves with their systems, data along with resources issues ahead of the IPO, then there will be less distractions while external reporting. Moreover, they will have finely tuned management and finance system, delivering data that drives performances and enhanced decision making. So it is supposed to be good place to be after an IPO. Management is also highly paid in public limited companies as compared to private.
It is for sure that if done properly, you can guarantee compliance, minimize costly distractions, enabling finance to be a strategic business partner, you can be successful for taking your company to be public. Though there are pros and cons in every field but by going public, there is no burden on a single person or the owner as it comprises of board members who collectively take decisions for the benefit of the organization.