Taking a company Public through an Initial Public Offer (IPO) is a major task for any entrepreneur. Going public gives an opportunity for business growth, brand equity and a serious legal responsibility as well. OTC Exchange of India plays an important role in your endeavour in Going Public.
Going Public...Benefits & Responsibilities
A company gains certain benefits and also assumes certain additional responsibilities by going public. The company becomes public property, the ownership is shared, business opportunities multiply and the control over the company's future is no longer exclusive.
Access to Capital
Going public allows a company to have access to the most substantial source of corporate funding. A favourable debt to equity ratio also allows greater bank financing at favourable interest rates. Public companies can return to the market for additional equity through secondary equity offerings.
Increased Employee commitment and recruiting power
On going public, a company can institute stock options for its employees.The valuation of these options being readily available the company can attract the best talent and ensure commitment of its employees.
Complements product marketing
Going public attracts media attention. Newspapers and magazines are more likely to focus on public companies on which information is readily available. This publicity can be harnessed and used towards marketing the products of the company.
Expands business relationships
Once a company is a public company, information on that company is readily available. Prospective suppliers, distributors and partners could easily garner information and forge a relationship with such companies.
Facilitates merger and acquisition activity
A public company is in a better position to finance acquisitions and mergers. It could raise finance through additional offerings. In the case of mergers the value of the company is also easily determined.
Provides flexibility in financing
A public company has easier access to finance. Calculating proceeds from the sale of shares can be easily determined, as the shares of a public company are more liquid than that of a private enterprise.
Sharing corporate control and financial gain
On going public, the individual shareholders become the owners of the company. Though the goal - enhancing profitability- would be the same, the shareholders would have to be taken into confidence by the management. The financial gain too, would also have to be shared among all the owners of the company.
Managing for shareholders value
The senior management and the Board of Directors of a public company are ultimately responsible to the shareholders who are the owners of the company. Furthermore, because corporate control of the company ultimately rests with the shareholders themselves, the objective of strategic decisions would necessarily include enhancing shareholders value.
Sharing strategic information
Periodic financial reporting by a public company is necessary under law and certain information, which would have otherwise been considered confidential, would now be made available to the public. Such prompt and clear disclosures will build shareholders loyalty and goodwill.