A company’s reasons for deciding to go public often include the ability to gain access to capital markets for financial expansion and acquisitions. Typically, they have spent many years reinvesting profits and guaranteeing loans, and rather than sell themselves out, they want to stay with the company and be a part of its future growth.
Even if your business is suited to floating, it may not be the right option for you. There are a number of key advantages and disadvantages to weigh:
o You gain access to new capital to develop the business
o A float makes it easier for you and other investors to make your investment
o You can offer employees additional incentives by granting stock options
o Being a public company can provide customers and suppliers with additional reassurance
o Your company can gain a higher public profile, which can be good for business
o Having your own shares traded gives you greater potential to acquire other businesses, since you can offer shares in addition to cash
o Personal guarantees from directors are generally not required for loans.
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 Floatation costs can be substantial and there are ongoing costs as well, such as higher professional fees.
o You must take into account the interests of shareholders when running the company, which may differ from your own objectives.
o You may have to relinquish some administrative control of the business and ultimately there is a risk that the business will be taken over.
o Public companies must comply with a wide range of additional regulatory requirements and adhere to accepted standards of corporate governance.
o Managers could be distracted from running the business by the demands of the floatation process and dealing with investors afterward.
It usually takes 6 months for a company to be publicly listed on the stock exchange, although the time period can vary from 3 months to 2 years. You’ll need a variety of professional advisers to help you with the legal, financial, accounting and valuation aspects of public listing, as well as prospectus preparation, share underwriting and assistance with initial public offering plans.