1. The Going-Public Decision 6

The downturn in the market that commenced in the spring of 2000 is reflected in the significantly smaller number of IPOs occurring between 2001 and 2003.
Data from the SEC shows the following annual figures for the number of IPOs, the gross proceeds raised, and the average size of the offerings:
Year
Number of IPOs
Gross Offering
Average
Proceeds
Offering Size
Raised (in Billions)
(in Millions)
2003
81
$15
$187
2002
86
$26
$300
2001
96
$37
$389
2000
380
$59
$156
1999
505
$61
$122
Source: Thomson Financial. Common stock. All IPOs.
Pros, cons, and expenses of going public
All in favor…
Cash/long-term capital
These are obtained to support growth, increase working capital, invest in plant and equipment, expand R&D, and retire debt, among other goals.
Increased market value
The value of public companies tends to be higher than that of comparable private companies due in part to increased liquidity, available information, and a readily ascertainable value.
Exit strategy
Liquidity and greater shareholder value may be achieved for the shareholders. Subject to certain restrictions and practical market limitations, shareholders may, over time, sell their stock in the public market. Alternatively, existing stock may be used as collateral to secure
personal loans.
Equity offerings
An IPO increases corporate net worth, does not need to be repaid, and may permit additional borrowing on more favorable terms because of an improveddebt-to-equity ratio.
Prestige/reputation
The visibility for shareholders and their company is usually enhanced. For example, a regional company may more easily expand nationally following a stock offering due to the increased visibility.
6
PricewaterhouseCoopers LLP Roadmap for an IPO

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