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Why do you want to be public?

26 Jun

Many business people believe that “going public“or doing an initial public offering (‘IPO’) is the end all be all of being in business.  The prestige and experience will bring untold riches and happiness following the big event.  Unfortunately, the truth of the matter is often exactly the opposite – “if you go public in the forest and nobody is there to witness it, did you actually go public?”  I jest, but the reality is often not far from that.

Benefits of being public

So, why would you want to be public?
  • Attract new capital with an IPO and have the ability to attract future capital.
  • Enhance prestige and public awareness of your company and its products.
  • Create publicly traded securities as currency for acquisitions.
Associated with people, being public gives management the ability to:
  • attract and retain executives and key employees with incentive stock options,
  • provide directors, senior employees, customers and suppliers opportunity to become stakeholders in the company, and
  • provide liquidity and exit strategy for owners and investors.
The last one, providing liquidity for owners may be the slam dunk for going public.  Many private businesses never provide a liquidity event for owners who get stuck in their businesses without an opportunity to “take some of their chips off the table.”  Going public gives them the ability to diversify their interests without having to sell their company to get at some of their equity.

Good candidates for “going public”

So what makes any company a good candidate for going public?
  • Company size – a size large enough to create a sound foundation for growth while not being
  • Growth potential and financial performance to date – public companies depend upon their ability to attract capital to accelerate their growth, so if no growth potential, not a good candidate for going public.
  • Financial statements that can be audited by an independent auditor – you’ve heard of them and know they exist, companies that couldn’t complete an audit if they tried, and unfortunately, we’ve experienced these first hand.
  • Quality of current management – if current management needs to go, get your house in order before trying to go public.
  • Public appeal – if your company is in an industry that everyone is shunning right now, like tobacco today, then you might not be able to achieve some of the reasons to go public in the first place (of course a shunned industry may be ripe for roll ups).
  • Market timing

Summing it up…

All in all, going public needs to be able to stand on its own with reasons being focused on liquidity, capital formation, and creating a sound foundation for accelerated growth.  We can help your company determine if you are at the right point in your corporate existence to go public, or if you need some work before you get there.
Contact us on our contact page for more information…

Copyright 2015 by Rhodes Holdings LLC, all rights reserved.

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Posted by on June 26, 2015 in BLOG

 

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