Public offering
An IPO in which a company sells its unissued securities and receives all the proceeds in the form of additional capital is called a primary offering. A securities sale in which securities held by the owners of the company are sold, and from which the owners receive the proceeds, is called a secondary offering. IPOs are almost always primary offerings, but may include a small number of shares held by the present owners.
Why am I going public?
The most important question a CEO should ask is, “Why do I want to go public?” Some of these reasons are:
—To raise money for expansion of operations
—To increase market value
—To acquire other companies
—To attract and retain employees
—To diversify and liquefy personal holdings
—To provide liquidity for shareholders
—To implement an estate tax-planning strategy
—To enhance the company’s reputation
Other reasons may be private and personal. It is truly important to recognize your reasons and to keep your goals in mind throughout the going-public process.
Is going public right for your company?
A company usually begins to think about going public when the funding required to meet the demands of business expansion begins to exceed its ability to raise additional private/venture capital funding or debt capacity. But simply needing capital does not always mean that going public is the right, or even possible, answer. Your company must also be perceived as an attractive investment candidate.
How can you determine if your company is a public offering candidate? Your answers to the following questions can help.
Does your company have an attractive track record?
Generally, a company that outpaces the industry average in growth will have a better chance of attracting prospective investors than one with marginal or inconsistent growth. Some underwriters consider a company to be an IPO candidate if it has annual revenues of at least $50 million and profitability of $1 million or more. Even so, manyearly-stage technology companies also have successfully gone public. The Internet has created an opportunity for many of these early-stage technology companies to exponentially grow their business in a very short time as compared with more “traditional” companies. Though they may not currently exhibit a strong growth rate, investors perceive these companies as having enormous potential for growth because of the other favorable characteristics they possess (e.g., product
or service that is highly visible, unique or of interest to the public, and capable and committed management).
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PricewaterhouseCoopers LLP Roadmap for an IPO
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