Initial public offering can be an excellent way for a corporation to raise a large amount of capital. In an initial public offering, a corporation’s shares are made available to the general public, thus providing a substantial influx of cash. The term applies only the first of such offerings, and any later offerings are referred to as secondary market offerings.
The benefits of an initial public offering are numerous. In addition to the financial gains, a company that decides to go public will also increase their public awareness and credibility.
Since public companies are more carefully and closely monitored than private companies, many investors feel that that they make for more stable investments. This increased demand is reflected in a higher overall valuation of the company. In addition, media outlets are generally more willing to cover public companies, so publicity generally increases.
Going public also increases the liquidity of company shares, further increasing the value of the company. At the initial public offering, a market is created for the company’s shares, allowing investors to trade freely. That freedom to sell as necessary lowers the risk involved in holding shares, thereby increasing value.
For a company that has difficulties attracting and retaining quality employees, going public can offer another form of compensation. While shares of a company can certainly be offered as compensation by private companies, they are even more valuable when they have the liquidity and stability that comes with going public. In addition to increasing morale, stock options help to align the incentives of employees to those of the company.
Exit Strategy for Owner
The owner of the business may enjoy similar benefits after going public. His or her shares immediately take on a liquid, easily calculated value. While there are restrictions on when those shares may be traded, the overall value of the owner’s percentage should increase after the initial public offering. In fact, many business owners decide to go public as an exit strategy. Once the company is public and shares can be sold, it becomes much easier to remove oneself from ownership.
One or two representatives from the directors and senior management of your business
A financial adviser, to manage the issue for you, complete the prospectus and investment statement, and any international offering document, and provide you with independent advice on the issue and the value of your shares
A lawyer in each of the countries you intend to list, to certify compliance with laws relating to the issue of securities to the public
An accountant in each of the countries you intend to list, to opine on the historical and any forecast financial results
A share broker in each of the countries in which you intend to list - to arrange the distribution and settlement of the issue
A share registry in each of the countries you intend to list
It is also important that your independent financial adviser provides you with good advice:
Before the issue, to ensure the due diligence process is well planned to minimise the demands of your business and to ensure your business is as attractive as possible to potential investors, and
After the issue, to ensure the critical after market for your shares is satisfactory, and to ensure new governance processes required by listing are in place and working effectively
Our team can advise you before and after the issue, manage the issue for you - including the due diligence process - complete the offering documents, value your business, and assist you to engage the most appropriate legal advisers and brokers.