Meraki Partners, LLC
Private companies go public to raise capital, complete acquisitions, recruit talent and increase shareholder value. Capital is frequently used to expand sales, marketing, distribution, research & development and fund acquisitions. Public companies also utilize their stock as currency to acquire other businesses or assets.
When you hear that a company has gone (or is going) public, it means that its shares are available to be purchased by the public on one of the public exchanges. The very first time that stock is sold this way is during the company’s IPO, or Initial Public Offering. However, some companies offer shares before their public listing and then complete a direct listing rather than an IPO.
There are a lot of reasons why a company would choose to go public, but the most common is that in doing so they can fund their own growth and expansion: when shares of a company are sold, capital is raised that can be used to fund growth, the acquisition of assets, recruit additional staff and more. Going public also raises a company’s visibility and prestige and gives initial investors and employees the opportunity to liquidate their existing shares over time.
Going public is not a decision that’s made lightly. There are many pros and cons that owners must weigh and, even once they decide to move forward, they have to prove themselves to potential investors. The process takes time, can be costly and is often frustrating, particularly for entrepreneurs who’ve previously had the luxury of answering to nobody but themselves
If the company’s goal is to raise capital, there are other ways of doing so, without the expense of time or the cost of pursuing an initial public offering or direct listing. But there are other considerations beyond funding, including boosting the company’s visibility and the use of stock as currency to accelerate organic growth and make strategic moves.
The decision makers may be the company’s owners and executives, board and key shareholders, and for them one of the biggest downsides of going public is that they will suddenly find themselves required to be fully transparent to both investors and to the Securities Exchange Commission, an agency that they will have to register with if the company goes public. They’ll also have to submit to audits and additional oversight.
Once the decision is made to move forward, there are hoops to jump through to make an IPO or direct listing a success. If you're considering a public listing, let's schedule a call to discuss the opportunity, advantages and drawbacks.
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