Floating a company, or Going Public, is the legal process by which a company goes from being privately to publicly held. This process can be quite daunting to any organisation looking to grow through IPO and takes the company through a series of activities which ultimately results in a percentage of the company is made available for purchase by the general investing public, on an investment platform, like a stock exchange. The sale of stock which was previously privately held is now called the Initial Public Offering, or IPO.
Where most organisations see Going Public as a way to raise capital for the business itself, many organisations also see this type of growth as opportunity for additional incentives and attractions like being able to offer shares to attract and retain employees and garner additional press coverage to coincide with their PR campaigns (Public companies tend to get more press than private companies do). Floating gives businesses access to raising capital for a number of reasons – it may include having new access to additional sources of capital that become available through a public listing or improving their debt to equity ratio enabling it to borrow more from conventional sources like banks.
So, why wouldn’t anyone want to have instant access to more money, more credibility, more appeal-ability? We know that there’s no such thing as a free lunch, and with every large-scale commitment like this one, there are a host of things to consider before contemplating taking your business down this path.
The challenges associated with floating a company are seven-fold. Going Public usually has a high initial cost, and can be anything up to 25% of the money raised by IPO, coupled to annual audit fees, higher PR fees associated with maintaining and managing your now public brand. Typically, the process taken to float a company usually takes the better part of a year and, as we’ve seen it many times before, becomes an all-consuming activity that takes up most of the attention and focus of the business management team – risking a key distraction from core parts of your business. Deciding to float a company also means that you increase your levels of disclosure of core information about things like financial losses, criminal actions and lawsuits.
Suffice to say, making a decision to Go Public should never be one that is made without due attention and care – and, we would even suggest, is done in collaboration with business support who have been through this process more than once, and understand it intensively. No two listings are the same – and simply doing it because you’ve done it before, should never be a reason to repeat.