Going Public Through Ipo
Going public using IPOs (Initial Public Offerings) is an exceptional, challenging, and thrilling process, which has plethora of benefits, such as increased liquidity. Similar to an initiative that yields enduring rewards, the procedure involved in going public has its own cons and challenges, such as complicated reporting requirements, sophisticated accounting rules, pressure on resources and time, and management of the fresh stake holders. |
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Going public actually refers to a process by which stock shares are issued for first time by a private company to public investors. Appropriately referred to as an IPO, the procedure involved in going public thus play a vital role in transforming the privately owned business into a business owned by the public shareholders.
Although staging IPOs is a very expensive and time-consuming process, it plays an imperative role in development of the firm. It contributes to growth of businesses by providing them easy access to public capital and also by enhancing their degree of exposure and credibility. However, the whole process involves a significant deal of changes in business models and the likelihood of losing control and flexibility in management. In most cases, companies offer IPOs and go public when they want to redeem their initial investments and also when it is the only way left for achieving financial growth and expansion.
Any company that decides to stage its IPO should first send an application to SEC (Securities and Exchange Commission), seeking its consent to sell the stock shares to public. As the entire process of getting a company registered with SEC is very complicated, it may take a minimum of 6 months and a maximum of 2-3 years to get the required permission. Thus, using IPOs can cost the company anywhere in the range of $50,000 - $250,000. Most of the money is spent in costs of printing, accounting expenses, legal fees, and underwriting fees. Thus, before deciding to for an IPO, the company founders must assess the possible impacts in future, current capital requirements, and various alternatives, such as partnership and joint ventures.
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