As a public company you are required to report and certify ﬁnancial information on a quarterly and annual basis. Ongoing expenses related to this include administrative and investor relations costs including quarterly reports, proxy material, annual reports, transfer agent, and public relations. You will now be paying premiums for directors’ and ofﬁcers’ liability insurance as well.
—Loss of control
If more than 50 percent of a company’s shares are sold to just a few outside individuals, the original owners could lose control of the company. If, however, the shares held by the public are widely distributed, management may maintain effective control, even though it owns less than 50 percent of the shares. Many companies structure their offerings so that after an initial offering, the founder(s) still has control and after subsequent offerings the entire management team maintains control.
—Loss of privacy
The registration statement and subsequent reports require disclosure of many facets of your company’s business, operations, and ﬁnances that may never before have been known outside the company. Some sensitive areas of disclosure that will be available to competitors, customers, and employees include: (1) the compensation of ofﬁcers and directors, including cash compensation, stock option plans, and deferred compensation plans;
(2) the security holdings of ofﬁcers, directors, and major shareholders (insiders); and (3) extensive ﬁnancial information (e.g., ﬁnancial position, sales, cost of sales, gross proﬁts, net income, segment data, related-partytransactions, borrowings, cash ﬂows, major customers, and assessment of internal controls).