Initial Public Offering (IPO)

If you’re thinking of exiting your business, and wondering what the most lucrative option may be, an IPO is worth considering.

The case for going public:

  • Raising equity at favorable valuations: An Initial Public Offering (IPO) may allow shareholders to raise substantial fresh equity at extremely favorable valuation
  • Creating a currency for acquisitions or compensation: If your company has an aggressive acquisition program, it may use its own shares to fund acquisitions
  • Ongoing access to equity capital: Where a company has a public listing, it may return to the capital markets relatively easy for additional capital
  • Prestige: A successful public listing may contribute to a positive public perception

But, the case against going public:

  • Costs and risks of going public: Could cost 10-15% or more of the proceeds
  • Reputational risk: The risk of public failure concerns some business owners
  • Short-term pressure: Expectations are very focused on quarterly earnings
  • Costs of ongoing information provision and compliance: A public company must be fully transparent
  • Costs of shareholder communications and public relations
  • Possible liabilities: If full disclosure is not provided they may face potential liabilities
  • New skill sets and corporate culture
  • The possibility of hostile takeover: Once more than 50% of the shares are sold there is a risk of hostile takeover
  • Not really an exit: Going public only solves the problem of raising capital not succession

Is an IPO the best offer for your business’s future? The only way to know is to review your options. Call Covenant Consulting Group for your FREE meeting to learn more about Exit Options for Business Owners!