Going Public

Going public is a daunting experience, with the company and its directors exposed to the glare of publicity and the scrutiny of analysts and investors.

There are many positive reasons to IPO (Initial Public Offering), including providing a partial exit for founders and investors, raising your profile with customers, and raising finance for expansion.

For the right companies, an IPO can fuel rapid growth and the creation of shareholder value. However, an IPO is not the right solution for every company, and can be very costly and damaging for a company that is not properly prepared for it.

A significant number of IPOs ultimately do not deliver value for shareholders. For example, consider a company that, following IPO, misses earnings expectations or fails to deliver on its business plan.

Investors and analysts will inevitably become disenchanted, the share price will fall / collapse and liquidity in the shares will dry up, leaving the management team's reputation and credibility damaged, sometimes irreparably.

At that point the strategic options for the company can become limited. Raising further funding may be extremely difficult, and the company still has to pay the on-going costs of regulatory compliance and maintaining a listing.

The answer lies in thorough preparation and understanding of the process. Perhaps the biggest mistake companies make is not preparing sufficiently in advance. An IPO can be done in four months — but it is advisable to start preparing a year in advance of starting the IPO process.

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