When a private company makes an initial public offering of stock, it’s called an IPO. Most of us have heard of a company IPOs because stories about IPOs make the news. Many of you may have even bought stock in a newly-public company. And if you’re a business owner? You may have wondered if going public could be in your future.
In 1996, German telecommunications company Deutsche Telekom AG issued stock that brought in $12.48 billion.
Credit card giant Visa went public in 2008. Despite the terrible economic conditions that existed at the time, Visa stock took off, bringing $17.9 billion in capital to the company.
Facebook’s 2012 IPO raised about $16 billion dollars, though investors did not initially like the stock.
Most companies that go public won’t generate that much interest or that much capital, but a carefully conducted IPO can make a substantial difference in the company.
There Are Some Distinct Advantages – and Disadvantages – to Going Public.
As with any transaction, there are pros and cons.
Advantages of going public include:
- Raising Capital. When a company needs a large influx of capital, selling stock is one way to get it.
- Mergers and Acquisitions. Public companies are better able to handle the negotiations that go into a merger and acquisition transaction.
- Increased Sales and Profits. A public company may enjoy the type of public exposure that draws in new clients and increased sales.
- Filing fees and legal fees required to set up an IPO can be prohibitive.
- Increased Exposure. Being in the public eye means potential loss of privacy. Information customarily kept confidential could be exposed to vendors and competitors unless the company carefully safeguards it.
- Loss of Control. Management of the company becomes complicated as majority and minority shareholders are added to the mix.
- More Oversight. Public companies are subject to greater regulatory oversight, including federal and state agencies. Reports made to the SEC, for example, are required – and public.
Is an IPO in Your Company’s Future?
Well, that depends on several factors. As with any complicated transaction, the results could be far-reaching and long-lasting. Careful analysis of your current corporation condition and consideration of plans for the future are needed.
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Does your company need the attention of an experienced business attorney? Contact Virtus Law at 612.888.1000 or send us an email at firstname.lastname@example.org. Our main office is in Minneapolis, Minnesota. Other offices: Edina, Mendota Heights, and Red Wing.