Publicly listed companies can capitalize on significant advantages in the areas of raising equity and debt financing, attracting and retaining employees, completing acquisitions, improving industry reputation, increasing shareholder liquidity, creating meaningful long-term wealth and reducing business risk.
Raise equity and debt financing. Public companies have a larger base of potential investors who prefer to invest in public companies since public companies are obligated to provide updated financial and other information, management is held to higher regulatory requirements and investments can be liquidated faster, easier and at lower cost as compared to private company investments.
Attract and retain employees. Public companies can offer management, key personnel and other employees shares and stock options, which are incredibly effective at attracting and retaining employees.
Complete acquisitions. Public companies are able to complete acquisitions more easily since they can use stock in lieu of cash consideration, have a higher level of credibility in the eye of private company management and investors and can provide investors in target companies with visibility on their own exit strategy.
Improve industry reputation. Public companies and their key management tend to secure more media coverage and are generally viewed as being more credible participants in their industry.
Increase shareholder liquidity. One of the main reasons private companies seek a public listing is to provide their existing and future shareholders with a market by which they can sell, or buy, shares.
Create meaningful long-term wealth. The main reason private companies go public is to create significant long-term wealth for their investors and management. Public companies are typically valued at more than twice their own private company valuation. In certain cases, the public company value could be significantly higher. Management teams who understand that being publicly listed can be a fantastic tool to raise capital, recruit and retain key talent, complete acquisitions and gain more industry attention; are typically best at maximizing shareholder value and creating significant long-term wealth.
Reduce business risk. Business risk is reduced since public companies can more quickly and easily raise capital, complete trans-formative business transactions and recruit top talent, even when plans haven’t developed as originally anticipated whereas this often isn’t possible as a private company.