The first priority in deciding to take a company public, advises Geoffrey Byruch “Is to ensure there’s a comprehensive understanding of what it means to be a publicly held company.” There are advantages and disadvantages for a company to go public. There are risks, rewards, and significant costs to be considered with using an Initial Public Offering (IPO).
Going public refers to a private company’s IPO, thus becoming a publicly traded and owned entity. Businesses usually go public to raise capital for expansion. Venture capitalists may use IPOs and an exit strategy as a means to recoup their investment in a company.
With goals typically including large financial payouts, capital for expansion and diversification, the ambitious entrepreneur’s dream is a successful IPO. Therein lies the launch of the risk and reward process. The company must take into consideration the advantages and disadvantages of sharing ownership of—and control over— your company.
Geoffrey Byruch Shares Steps to Consider Before Taking Your Company Public
The first step is to identify the primary reason for going public. It may be to raise capital that doesn’t need to be paid back. This is a requirement with bank loans or shareholder equity. Going public can also be used as a means to raise the corporate profile in order to attract new customers or clients. Whatever the reason, taking a company public can be a daunting process. Geoffrey Byruch notes, “Completing due diligence should be the next step.”
Determining whether your company has sufficient value to lure Wall Street investors should be at the top of your list of questions to address. Some investigative work is needed to determine how the shares of your competitors, currently trading on the Exchange, have performed. Tracking your competitors share performance provides an opportunity to make an informed projection of the anticipated growth and numbers your company should experience.
Consideration needs to be given to how your corporate message will be conveyed to investors. A strong marketing component is essential to ensure your company’s story can be effectively communicated to investors and the media. Getting ‘buy in’ from investors and global media will be essential to increasing the chances of a successful IPO.
Due to the stringent reporting requirements of the Security & Exchange Commission (SEC) it’s recommended that any company considering using an IPO engage the services of a general counsel and an investor-relations expert. Both should have extensive experience dealing with SEC reporting. Geoffrey Byruch has over a decade of Institutional Sales and Trading and Investment Banking experience in the financial industry. Byruch is Founder, CEO and Managing Partner of HFP Capital Markets LLC and its parent company Hudson Financial Partners LLC.
Taking a company public shouldn’t even be a consideration unless you have the right board of directors in place. As a publicly traded company, your board members will need to be independent and prepared to work on committees to manage requirements such as auditing and compensation.
It’s recommended that at least a year before filing for an IPO, the search and appointment of board members should begin. The Board of Directors will be the public face of your company. Byruch advises, “You will want to ensure that not only do you have quality people in place, but that they work together as a cohesive unit in the best interests of the company.”
Geoffrey Byruch Notes the Advantages of a Public Company
There are distinct advantages to being a public company. Geoffrey Byruch shares the following advantages:
● Bolsters available capital: this is an appealing alternative to taking on additional debt through bank loans or shareholder equity, which must be paid back.
● Simplifies acquisitions: whether it’s additional equipment needed for manufacturing or expansion to a larger facility, the capital raised through an IPO makes it easier to acquire what’s needed for expansion.
● Diversification of ownership: the responsibility for the management and success of the company no longer rests on one person’s shoulders. Diversification of ownership also increases access to the skills, experience and contacts to further company goals.
● Increases corporate stature: due in part to the stringent requirements to issue an IPO and also a certain corporate steadfastness, a publicly traded company enjoys an increased prestige in the marketplace.
What is the ‘right’ time to go public? An individual privately held company needs to make the decision to go public when they are sufficiently confident in their success and are prepared to face the advantages and disadvantages in order to reap the rewards.
The U.S. economy, notwithstanding, companies domiciled outside of America are looking to list on U.S exchanges. Geoffrey Byruch advises that U.S. investors have expressed growing interest in the capital markets in India. India has one of the most attractive emerging markets. India’s accounting and regulatory standards are in-line with U.S. practices. “Our belief is that India will continue to advance economically, and it will become an important source for U.S. investors,” notes Geoffrey Byruch, an industry expert.