A company’s reasons for deciding to go public often include the ability to gain access to capital markets for financial expansion and acquisitions. They have typically invested many years in recouping profits and guaranteeing loans, and instead of selling, they want to stay with the company and be a part of its future growth.
Even if your business adapts to floating, it may not be the right option for you. There are a number of key pros and cons to weigh:
Advantages:
o Gains access to new capital to develop the business
o A float makes it easier for you and other investors to make your investment
o May offer additional incentives to employees by granting stock options
o Being a public company can give customers and suppliers greater peace of mind
o Your company can get a higher public profile, which can be good for business.
o Having your own shares traded gives you greater potential to acquire other businesses, as you can offer shares and cash
o Generally, personal guarantees from directors are not required for loans
Disadvantages:
o Your business may become vulnerable to market fluctuations, which are beyond your control.
o If market conditions change during the float process, you may need to abandon the float.
o Floating costs can be substantial and there are ongoing costs as well, such as higher professional fees.
o You will need to consider the interests of shareholders when running the business, which may differ from your own goals.
o You may have to relinquish some control of the management of the company and ultimately there is a risk that the company will be taken over.
o Public companies must comply with a wide range of additional regulatory requirements and comply with accepted standards of corporate governance
o Managers could be distracted from running the business due to the demands of the float process and dealing with investors afterwards.
It generally takes 6 months for a company to go public, although the time period can range from 3 months to 2 years. You will need a variety of professional advisers to assist you with the legal, financial, accounting and valuation aspects of the public listing, as well as preparing brochures, subscribing for shares, and assisting with IPO plans.