Author: Gabrielle Jones
You’re an entrepreneur on the move. Your business is growing by leaps and bounds and you have a great product or service that your clients are excited about. You’d like to access capital to grow your office space or hire more administrative staff, and you think you’re ready to take the ultimate step: going public. However, you may want to think twice. Facebook’s IPO performance recently begs the question is going public the way to go?
Why go public?
-Capital- The need to raise money is probably the number one reason companies go public.
-Liquidity- Going public makes it easy early investors and venture capitalists to buy and sell stock.
-Prestige- Enhanced competitiveness, stability, and the grant of restricted stock or stock options can heighten a company’s reputation with employees, investors, and industry insiders.
What’s the risk?
-Time & Expenses- It usually takes 4-8 months to complete an IPO, and you can spend 15-25 percent of the money raised on direct expenses.
-Loss of Control- Once you’ve gone public the founders must give up some control and can even be forced out of the company. There’s also a loss of control over your company’s information since public organizations must disclose a lot of information.
-The Market- Your company’s performance in the market in accordance with analysis’s expectations becomes the way success is measured.
What’s the alternative?
The prevalence of public companies is actually declining in the U.S. A recent article in The Economist goes so far as to call them “endangered.” One reason for the change is the emergence of partnerships and alternative corporate forms that offer the ability to access capital and grow that public companies have, without the expenses and disclosure obligations. Private-equity firms organized as Limited Liability Limited Partnerships (LLLPs), Publicly Traded Partnerships (PTPs) and Real Estate Investment Trusts are thriving today.
One comprehensive online resource worth checking out is A Guide to Real Estate Investing, which covers many of the topics in this article in one convenient post. Bottom line: make certain to do your homework and explore all of your options before taking the leap into the public arena!