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Initial Public Offering of Shares—Is it the Best Option for your Corporate Organization?
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Going public or not?
That is one question that pops out of the minds of different corporate directors and executives of growing companies. The consistent growth of their operation translates to revenues. In order to maintain the flow of revenues, different corporate directors and executives must sustain the growth of the company by infusing additional investment.
Securing a corporate loan is a good idea, but undergoing an initial public offering is probably the best idea that corporate directors and executives can arrive into. Why get the company into debt when the company’s assets such as common shares could be used to raise additional capital that will sustain the company’s continuous growth?
IPO or initial public offering is the first or initial sale of a company’s common shares to the public, which is why it is also referred to “going public”. The most convincing reason why many companies are going public is because it is the most convenient and probably the safest way to raise capital that will be used to sustain operational expenditures.
However, there are still some “strings attached” to this process. Though it’s other reasons such as easy access to much needed capital, increased employee compensation and liquidity due to additional funding, prestige, and publicity are compelling, there are still pointers that you must consider when deciding if initial public offering is the right option of for you to take.
Remember what happened to Netscape when it went public in April 1994? They became the prestigious computer application company that rose above its competitor, with its actual market value reaching $1 billion. However, the executives lost control of the company and even the company itself, which resulted to the selling of the company’s interest to America On Line (AOL). Many investors think that they can capitalize from the revenues generated through IPO, and yet what happened is that the company itself suffered.
Before getting into an IPO process, make sure that your company is “sexy enough” for investors. In other words, your marketing ideas (the industry and the products or services that you offer to the public) are extremely popular to the consumer, which makes it very appealing to the investors. That is why IPO is not ideal for starting and not-well known companies because the risk of losing any infused investment due to unpopularity of its marketing ideas is present. Better assess your marketing ideas first before jumping into IPO.
Do you really understand why you are going into public? You must look the revenues that will be generated on IPO as an “emergency fund” and not as a “luxurious fund”. If the company’s present financial bucket could still sustain the growth of the company and the presence of an explosive growth needs to be seen, there is no reason to go in public. It will just create little benefits to the executives as well as to the future shareholders.
Do you have the necessary funds that you will spend when going public? Keep in mind that there are corresponding expenditures in each stage along the process. For instance, you must have a well-established business plan in order to answer the disclosure document questions, which is an essential part in convincing investors with regards to the viability of your IPO. Creating a well-established business plan alone will cost you as much as $20,000.
Is the initial public offering the best option that you can choose? It requires careful assessment and evaluation of various factors. Do not be attracted by fame and publicity—it can easily kill you.
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Initial Public Offering News
Baltic Trading's IPO Raises $228 Million in Pricing at Low End - BusinessWeek
Baltic Trading's IPO Raises $228 Million in Pricing at Low End BusinessWeek The IPO is the first of three US offerings this week and comes after seven companies postponed or delayed initial sales this year. ... Shipping co IPO prices at low end-underwriter Baltic Trading 16.3M-Share IPO Priced At $14, Bottom Of Range Baltic Trading Limited Prices Initial Public Offering |
The Film Department Cuts IPO - New York Times (blog)
 New York Post | The Film Department Cuts IPO New York Times (blog) The Film Department Holdings cut the size of its planned initial public offering by 30 percent Monday, The Associated Press reported. ... The Film Department Cuts Size Of IPO By Another 29% The Film Department (TFDI) Reduces Size of IPO; Still Sees Price of $12-$14 |
China auto dealer Zhongsheng halves HK IPO: source - Reuters
 AFP | China auto dealer Zhongsheng halves HK IPO: source Reuters HONG KONG (Reuters) - Zhongsheng Group, a Chinese dealership providing services to carmakers, halved its Hong Kong initial public offering to $474 million ... Zhongsheng Said to Start Taking Orders for Downsized HK IPO Zhongsheng Group Seeks Up To US$544 Million In Hong Kong IPO - Source Zhongsheng set to take orders for downsized HK IPO |
China Real Estate 4Q profit surges on heels of IPO - BusinessWeek
China Real Estate 4Q profit surges on heels of IPO BusinessWeek The US-listed shares for the company peaked shortly after their Oct. 16 debut in an initial public offering that allowed US investors to get a piece of ... CRIC Reports Fourth Quarter and Full Year 2009 Results |
Kamps Said to Plan IPO to Raise as Much as EU500 Mln - BusinessWeek
Kamps Said to Plan IPO to Raise as Much as EU500 Mln BusinessWeek The IPO is being organized by Morgan Stanley and Deutsche Bank AG, said the people, who declined to be identified because the plan is confidential. ... |