Taking a company public is a potentially rewarding means to increase its overall exposure and attract additional working capital. Still, this is a rather dramatic step and it should only be performed after an adequate amount of research has been performed. What are four areas that you should be concerned with?
The Value Proposition
A value proposition is another term for how attractive your company is to outside investors and existing stakeholders. These individuals always want to know their expected ROI (return on investment). This proposition includes such essential metrics as growth predictions, sales projections and future ventures.
Any company planning to venture into the public arena needs to have a robust financial department firmly in place. Not only will this help to avoid any potential pitfalls, but many regulatory bodies now stipulate that this is one of the requirements to qualify for a public listing. It is wise to research this further in regards to the market where you intend to list. Other variables such as the market cap of a firm may play a role. Experienced professionals such as www.gtgadvocates.com will provide you with further insight.
Another area to be concerned with involves the transparency guidelines which public companies are now obliged to respect. How comfortable are you (and your staff) with such regulations? Stock prices, potential mergers and other issues will now have to be clearly addressed.
Any public company is naturally exposed to the volatility of the open market. Will the firm in question be able to supersede a protracted financial downturn or would such exposure prove risky in terms of ongoing operations? Smaller firms may have difficulty adjusting to turbulent times or a sudden downturn. This is one of the primary reasons why many companies only choose to “float” during an optimistic market. It is wise to consult with the primary investors to determine whether they are averse to such a risk or they are keen on a more liquid position.
Floating a company on a public market is an important step during its lifespan. Being prepared and appreciating the potential risks that are involved will help anyone to position themselves on the road to success.