Alma asks: Introduction to going public: When a company first begins selling stock also known as initial public offering or (IPO), this is considered going public. Essentially what companies are doing is offering part of their company for a price. This money is then used to continue the growth and success of that company. In exchange, the stock holders either have some say in the company and share the profits, or they just share in the profits.
Stock holders are the people that bought stock after its initial public offering. The amount of wealth that could be generated for a small buy of stocks is tremendous. Stocks can be used as liquid assets that can leveraged to obtain credit and loans. The stock can be used for equity against anything borrowed from the bank. Companies make out also because they have the financial backing that they need to excel. Ultimately, this is the primary reason for a company to go public. Even though rules, regulations and laws differ for publicly traded business, these are minor obstacles any strong company can over come.
Added benefits: A company who decides to go public usually draws a large amount of attention from millions of investors globally. They become more visible on the world stage which leads to higher revenue in the long run. Stock options may be given to employees as well. Employees will have the feel of being part owners in the company if they are able to get stock. This can mean increased productivity on a day to day basis. Going public does have some down sides to it. For instance, if someone is able to gain a majority of a companies stock, they ultimately have control also. The entire company could be restructured overnight ending long standing traditions that the company may have employed.
Weighing the options: Once a company has gone public, details about that company become a matter of public record. Anyone can find out if you’re turning a profit or if you’re seeing loses. Not only can they see but they can get specific details and watch as to how a company is progressing. The best time for a company to go public is when they are moderately successful and are faced with the challenges of growing their business. Things such as additional employees, building space and equipment all require money. If everything goes well a small start up company could one day become a huge corporate giant. Another option for going public is selling your stock for a profit. If someone feels they want out of a particular company and the company goes public, they can sell their stocks and thus their control to someone else. It could be used as a way to retire or wash your hands of a company by just simply selling out.
Conclusion: There are a couple of things companies need to do in order to go public. Since shares will be sold into the company, someone has to sell them. Normally a underwriter or a bank handles this for a commission from sales. Lawyers have to be brought in also to make sure that ever rule, regulation and law is being followed properly. Once all of this has been done, a company can go ahead and go public.
