There are several routes to taking your company public and I will save the mechanics of that for another post…
But taking your company public is often viewed as a milestone achievement for SMEs, as it opens up access to new funding sources, provides opportunities for growth and offers a clear path to an exit.
Before taking the plunge into the world of publicly traded companies, it’s important to weigh both the potential benefits and risks – and of course to get some advice specific to your own business.
ADVANTAGES OF TAKING YOUR COMPANY PUBLIC:
💰 CAPITAL INFUSION. It can open doors to a much larger investor community, enabling you to raise substantial capital. You can fuel expansion plans, drive innovation, strengthen your operations, or pursue strategic acquisitions.
🌟 MARKET VISIBILITY. You can showcase your company on the bigger stage, attracting customers, partners, and top talent. This increased market exposure can boost your brand reputation and give you a competitive edge.
💸 LIQUIDITY OPPORTUNITIES. Being part of a public company allows existing shareholders, including founders, employees and early investors, to unlock the value of their investments by selling shares on the public market.
💷 CURRENCY FOR ACQUISITIONS. Publicly traded companies have the advantage of using their shares as a currency for acquisitions. By issuing shares as part of a merger or acquisition deal, companies can pursue strategic growth and expansion without depleting their cash reserves.
RISKS WITH TAKING YOUR COMPANY PUBLIC:
🎢 MARKET VOLATILITY. The success of becoming a listed company partly depends on market conditions and investor sentiment. Market volatility or unfavourable timing can negatively impact performance and valuation.
🔮 VALUATION MISMATCH. Aligning your company’s valuation expectations with investor perceptions is critical. Overpricing shares can discourage investors, while undervaluing the company can result in missed opportunities.
📜 REGULATORY AND COMPLIANCE DEMANDS. It will undoubtedly entail increased regulatory and compliance obligations. You must adhere to stringent financial reporting standards, disclosure requirements, and governance practices. There is a financial cost with that.
🫱🏼🫲🏼 INCREASED SCRUTINY. Publicly traded companies face more scrutiny from investors, analysts, and the media. Meeting quarterly earnings expectations, managing investor relations, and maintaining transparency become paramount. The pressure to perform and meet shareholder expectations can be significant.
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