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The Unseen Benefits of Going Public

Article Summary: Do you want a way to make it easier to raise capital for your business? Do you want to increase the value of your company before you sell it? Are you looking for a way to expand you company? You may be a candidate to take your company public.

Capital Access:


* If a company needs to raise capital, it can sell stock(equity). These funds may be used for a variety of purposes including; growth and expansion, retiring existing debt, corporate marketing and development, acquisition capital and corporate diversity. Unlike an IPO you suffer less dilution. Once public, a company's financing alternatives are increased. A public status can also provide favorable terms for alternative financing. In general, public companies have a higher valuation than private enterprises.


Liquidity for Shareholders:


* By going public, a company can create a market for its stock. In general, stock in a public company is much more liquid than stock in a private enterprise. Liquidity is created for the investors, institutions, founders, owners and venture capital professionals. Investors of the company may be able to buy or sell the stock more readily. This liquidity can elevate the value of the corporation. The stock's liquidity is contingent on a variety of factors including, lock-up restrictions and holding periods. A public company has greater opportunity to sell shares of stock to investors. Ownership of stock in a public company may help the company's principles to eliminate personal guarantees. Liquidity can also provide an investor or company owner an exit strategy, portfolio diversity, and flexibility of asset allocation.


Compensation:


* Many companies use stock and stock option plans to attract and retain talented employees. It is increasingly common to recruit and compensate executives with a combination of salary and stock. Stock in a public company can be issued as a performance based reward or incentive. Stock can be instrumental in attracting and keeping key personnel. Also, certain tax advantages are a consideration when issuing stock to an employee. Generally, capital gains taxes are lower than ordinary income taxes. A public offering can create a market for the company's stock. This market can result in liquidity and reward for the company's employees. A stock plan for employees demonstrates corporate good will.


Prestige:


* A public offering of stock can help a company gain prestige by creating a perception of stability. A company's founders, co-founders and managers gain an enormous amount of personal prestige from being associated with a client that goes public. Prestige can be very helpful in recruiting key employees and marketing products and services. When sharing ownership with the public, you spread the company's reputation and increase its business opportunities. By selling stock on an exchange your company can gain additional exposure and become better known. This exposure may lead to improved recognition and business operations. The public status can be leveraged when marketing goods and services. Often a company's suppliers and consumers become shareholders, which may encourage continued or increased business. In this example, a public company could have a competitive advantage over a private enterprise. Once public, lenders and suppliers may perceive the company as a safer credit risk, enhancing the opportunities for favorable financing terms. Also, a public offering can create publicity that is effective when marketing your company.


Publicity:

* A public company generate prestige, publicity and visibility, which is effective when marketing your company. Public companies are more likely to receive the attention of major newspapers, magazines and periodicals than a private enterprise. The proper use of press releases, interviews or news stories can increase investor awareness, shareholder value and demand for the stock. A strong ad campaign coupled with media initiatives can potentially increase sales and revenue. The publicity received by public company encourages new business development and strategic alliances. Analyst reports and daily stock market tables contribute to the awareness of the consumer and financial community. A successful public offering can get your company's story out to the world and open an opportunity for investors that are not suited for an investment in a private company. The publicity that a public offering brings can attract the attention of potential partners or merger candidates. Because the financial condition of a public company is subject to the scrutiny of the SEC reporting requirements, existing or future business relationships are strengthened. Tremendous exposure can be gained from a combination of radio, television and print.


Mergers and Acquisitions:


* Once a company is public and the market for its stock is established, the stock can be considered valuable when acquiring other businesses. Being a public company can have a dramatic effect on a company's profile, perceived competitiveness and stability. This perception can lead to expanded business relationships and added confidence in the consumer. A valuation of a private company often reflects illiquidity. A public company will increase a company's valuation leading to a variety of opportunities for mergers and acquisitions. A public company also has the advantage of using the market's valuation when exchanging stock in an acquisition. SEC disclosure requirements offer merger candidates the assurance of shareholder scrutiny and accurate reporting of the financial condition or solvency of the public company. Using stock to acquire another company can be easier and less expensive than other methods. A public company's corporate strategy is outlined by annual reports and marketing brochures which encourages corporate growth, development and merger activity.


Exit Strategy:


* One of the important benefits of being public is liquidity, potentially offering great reward and financial freedom for the founders and employees. It creates a public market for the stock, which provides a potential exit strategy and liquidity to the investors. A psychological sense of financial success can be an added benefit of going public. A public offering can enhance the personal net worth of a company's shareholders. Even if a public company's shareholders do not realize immediate profits, publicly-traded stock may be able to be used as collateral to secure loans. Growing companies constantly need access to new capital. Going public is one way to obtain access, but it takes time and money.

Article Source: http://www.upublish.info

About the Author:
Andrew Green
Andrew Green http://www.reversemergersinfo.com/ info@reversemergersinfo.com