Going Public Is A Major Milestone For Most Companies
Many companies decide to go public after some time of operation. This is basically an important step for most companies. There are a number of reasons as to why a company may want to go public. This could be because it wants additional financing but does not want to approach the bank or wants to avoid any form of debt financing.
When a company goes public its overall cost of capital gets reduced. This lets the company negotiate with the banks as it has a solid standing. This helps to reduce the internal costs of any debt that is existing.
However, the main reason why a company would want to go public is to raise money. Going public lets the company raises lots of money and this helps it to spread its risks among a group of shareholders. This is important for growing companies. At this stage, the original shareholders of the company would like to cash in some profits but would still retain some percentage of the company ownership.
When a company goes public then it is listed on the stock exchange and its shares are now traded publically.
The advantages of listing a company, find out more, is that it adds to the prestige of the company. This allows the company to raise funds through the stock issuance. The company can now offer its securities to acquire another company. The company would also be attractive to talented employees because it can now give stock options to its employees. The company has an upper hand when it wants to obtain a loan from any financial institution. The company has better market exposure now as it attracts the attention of hedge funds and mutual funds as well as institutional traders.
The stock of the company is now associated with the exchange that it is traded on and this offers sort of advertising. The company has brand equity as it is now seen as credible with the public.
The publically traded companies had to have a soundtrack record and should have had a history which could show that they were profitable. This was before the internet boom. Now, however, many companies go public and they spend money through the IPO which makes the owners of the business-rich but leave the small investors robbed. This is known as an exit strategy and is something that investors should be aware of.
Companies go public to raise money for their business and for growth or expansion. It helps the company to expand geographically and this is a great way the company raises its profile.