July 3. 2012 | Elizabeth Dunseith
Things to Consider When Taking Your Company Public
Taking a company public is a huge step for any organization and not a decision that is taken lightly. Consider the recent activity by Facebook. The online website known for connecting millions of friends and redefining the word “Like” became an overnight sensation in the mid-2000’s. As a result of that rapid success, many thought it was only a matter of time until the company went public. It finally did in 2012, but with much less punch than expected. There have been reports that Mark Zuckerberg was initially hesitant to take Facebook public. Regardless of the co-founder’s feelings toward the IPO, there were several factors that came into play prior to the opening trade. If your company is considering an IPO in the future, consider the many advantages and disadvantages before making the final decision.
Shareholders benefit when the company does well, so there is a common goal to see the company profit. Shared risk is also something to think about. Another important consideration is the increased market awareness that can ultimately lead to better branding and marketing options as well as potential opportunities for mergers and acquisitions.
Although there are several benefits to taking a company public, there are also some disadvantages. While the increased transparency is a huge benefit to investors, the extensive reporting requirements required of public companies are often seen as a tedious and time-consuming task. The loss of control may be the biggest disadvantage to owners considering taking their company public. When reporting to multiple stakeholders and stockholders, you do not necessarily have the same authority you once had, and this is often viewed as a limitation.
There are numerous factors to take into account when considering taking your company public. Sometimes the benefits outweigh the negatives and sometimes keeping the company privately held is the best option for the organization. It is important to look at all the facts and have the right team in place to ensure your company can survive, and thrive, whichever decision is made.
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