When a business is at that stage of its life that it starts to consider its big “Next Step”, more often than not, the business strategy could lead them in the direction of stepping from the Private into the Public commercial worlds. Knowing where to start, how to prepare and how to understand all that the IPO process expects and offers, is very often a challenge in itself. In this series of IPO-related blog posts, we aim to take you through the troublesome to the terrific and provide you with the insight and information you need, to be able to tackle that next step with bravado, and ease.
What is an IPO?
An IPO, or Initial Public Offering, relates to the very first sale of stock issued by a company to the public. Before an IPO, a business is considered to be a Private company with a very small group of investors – who are usually the founders themselves, friends and family. All those people who helped to get the company off the ground, and trading. This could also include people like angel investors who have helped you to get started. The Public, on the other hand, refers to everyone else (whether they are individuals or institutions) who now have the opportunity to buy shares in your business. Until the shares are physically offered to the public, they are unable to purchase shares in your business. The process of an IPO essentially takes your business from being private (ie: not available to the public to purchase shares) to public (where they now have that option). Why do companies go Public? Essentially, when a business decides to go public, they are ready for their next growth spurt, and with access to public funds (and more of it) they now have that opportunity to grow. Although you are still able to raise funding as a private business, when you decide to go Public, the IPO opens up much larger pockets of cash that can transform your business almost overnight. There are additional benefits of going public – especially when you’re looking further down the line of business growth, for example: if your strategy includes a merger & acquisition, then the additional stock / shares that you now have in your business, can be used as negotiation to secure that deal.
What are the risks of Going Public?
Going public requires a lot of work. We’re not going to hide that. And although the benefits of an IPO can set you on the path for massive development, there is a large amount of work that you and your team will need to do to prepare for an IPO, as well as ensure that all post-IPO processes, stakeholders and shareholders are kept updated – all of which can sometimes tally up to huge business bills. As a business, successfully going public will require you to disclose financial, tax and accounting information. Once you have gone public, you will be…. Public. That means that your competitors will have access to information which previously may have been kept behind hidden doors.
If you find yourself in the pre-IPO space – considering to take your business to the next growth level, but need the best help in the business to get you there – our team is ready to talk to you. Find out more about how we can help today.