Why go public?

Why go public?

Going public can signify to the outside world that a company has achieved a special kind of success. Overnight the company can be transformed from a being a closely held entity with a handful of shareholders to a company with a large number of holders of its stock, which can easily be bought or sold through a stock exchange. – (Deloitte.com)

When news travels about the sudden wealth generated for company founders and initial investors following an IPO, it can be extremely captivating. It’s enticing thinking of the possibility to have enough capital available to achieve ones company goals/targets.  A company usually begins to think about going public when the demands of business requires additional funding that exceed the company’s ability to raise any extra capital through their existing channels.

Let’s have a look at some of the advantages of taking your company public…

Increase cash and long-term capital

Going public (being listed on the stock exchange) provides your company the opportunity for growth and expansion of your business. Instantly increase your working capital, acquire other businesses which may be paid for through company shares, expand research and development, invest in facilities and equipment, retire existing debt or move into larger and new markets.

By 2012 Facebook had grown so big that it needed to access massive amounts of cash to sustain growth. Well they raised $16 Billion!! Access to the public markets means access to millions of investors, big and small, and the money they provide can turbocharge a company’s growth and help it reach the next level.

Comcast acquired Time Warner Cable for $45 billion, but didn’t pay one penny in cashit offered its own shares as payment. Using stock to fund either part or all of a corporate acquisition is very common, and gives companies the ability to make large deals without having to raise additional funds. (envato.com)

Increase the liquidity for you and your investors

Once your company starts trading on the stock exchange, the market provides liquidity for management, employees, existing investors, owners and (or) shareholders. Essentially it provides a potential exit strategy for shareholders who invested in your company privately and/or during startup. Existing shareholders may over-time choose to sell their shares in the public market. Shares can also be used as collateral to secure other future loans.

Shopify raised $121 million in 11 years through private investors. When the company finally decided to go public in 2012 seeking international exposure, their IPO raised an additional $131 million in just one day. All the investors who believed in the founder’s “simpler” e-commerce platform finally paid off and they were able to convert their beliefs to actual profits. Bottom line: Shopify has doubled it’s revenue in last two years (from the time this article was written) and the stock price has risen from $17 per share in 2012 to ~$210 per share in today’s market . (theglobeandmail.com)

Get your company noticed

Listing on the stock exchange will give your company on-going exposure through worldwide media coverage of the financial markets. Brokers and future potential investors will begin following your company’s progress. The right market can raise your company profile, create brand awareness, achieve international recognition and increase overall poise in the company among stakeholders.

Attract top talent and retain current employees

A public company can provide stock-based compensation strategy for attracting and retaining managers and key employees. Stock options are a great way to reward your valued employees and is a way to give employees the opportunity to share in the financial success of the company.

The Cheesecake factory (Fortune Rank 98) uses stock options as a retention tool for general managers and executive kitchen managers. The retention strategy appears to be working as 94% of employees say that the company offers great rewards and 97% say they’re proud to work there. (fortune.com)

*Content sourced for this article by: fortune.com, theglobeandmail.com, nytimes.com, envato.com, cnet.com, wikipedia.org, techcrunch.com, wyattresearch.com

Roxbury Capital Group enables you to stay focused on what you do best, grow your business and get the Capital you need, Faster.

If you are interested in learning more about the advantages of taking your company public, please don’t hesitate to contact us.

Josh Turk Halifax NS MarketingJosh Turk,
SVP of Marketing
Roxbury Capital Group, www.roxburycap.com