The IPO process begins with contacting an investment bank and making certain decisions, such as the number and price of the shares that will be issued. Investment banks take on the task of underwriting , or becoming owners of the shares and assuming legal responsibility for them. The goal of the underwriter is to sell the shares to the public for more than what was paid to the original owners of the company. The number of U. Going public does have positive and negative effects, which companies must consider.
Advantages: Strengthens capital base , makes acquisitions easier, diversifies ownership, and increases prestige. Disadvantages: Puts pressure on short-term growth, increases costs, imposes more restrictions on management and trading, forces disclosure to the public, and makes former business owners lose control of decision making.
For some entrepreneurs, taking a company public is the ultimate dream and mark of success, one that is accompanied by a large payout. However, before an IPO can even be discussed, a company must meet requirements laid out by the underwriters. Quality of leadership is one of the biggest factors investors look at, beyond the financials, when considering buying into a company. While there are exceptions to these requirements, there is no doubt how much hard work entrepreneurs must put in before they collect the big rewards of an IPO.
Renaissance Capital. Accessed Sept. Securities and Exchange Commission. Your Money. Personal Finance. Your Practice. Popular Courses. Investing Investing Essentials. Key Takeaways Going public refers to a private company's initial public offering IPO , thus becoming a publicly-traded and owned entity. Going public increases prestige and helps a company raise capital to invest in future operations, expansion, or acquisitions.
However, going public diversifies ownership, imposes restrictions on management, and opens the company up to regulatory constraints. Article Sources. What do I need to know about the filing review process? What is an emerging growth company? What is a smaller reporting company?
Even if your company has not issued securities under a registration statement declared effective by the SEC, it could still become a reporting company and be required to file a registration statement under Section 12 of the Exchange Act. Exchange Act reporting and registration. Annual meetings and proxy requirements. Suspending reporting obligations. Disclosure Effectiveness. Financial Reporting Manual. Search SEC. Securities and Exchange Commission.
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The company has predictable and consistent revenue. There is extra cash to fund the IPO process. There is still plenty of growth potential in the business sector.