Why Take Your Company Public?
A growing company needs access to both working capital and expansion capital. Whether it is bank loans, subordinated debt, seed capital, venture capital, investment financing that access to capital must be realistic and achievable. Without access to capital even the most “self-funding” business will fail to develop to its full potential.
What makes the decision to become a publicly traded company the right one over the many other means of financing a business?
Going public may be the result of a long-term strategy for an organization that is growing and requires access to larger capital markets. Alternatively, you may be an entrepreneur with a promising young business founded upon an excellent idea. You have already built some shareholder value and are looking for leverage to get to the next step. The borrowing capability of most people is quickly exhausted when it is devoted to financing a demanding startup company. The public equity markets offer you untold numbers of new investors, and access to the crucial investment capital your company requires.
Many successful companies have been built without going public however as part of an exit strategy or succession plan many business leaders have seen that it makes perfect sense to go public and list on a recognized stock exchange.
What are the Benefits of Taking Your Company Public?
Taking your company public offers key strategic advantages including:
Growth - It can increase your company's equity base and create more leverage for financing growth through acquisition.
More Options - You may opt to finance an acquisition with common shares and avoid incurring additional debt or selling assets to finance the deal.
Competitive Advantage - You can finance your full business plan and implement the changes that will win you a competitive advantage or access to international markets.
Employee Retention and Recruitment - You can provide an employee retention program that works through a stock-based compensation strategy, helping you to attract and keep your best people.
Prestige - Through heightened public awareness, your company will increase its prestige and will acquire much greater recognition, which in itself can help your business.
While your planning process should always consider other sources of financing in addition to going public, it is wise to build a strategic business plan that takes note of the inherent benefits of gaining access to the Canadian capital markets.
What’s in it for your shareholders?
The price of your shares will be determined by several factors:
- The market’s perception of your management team and their business acumen.
- Your business track record.
- Your business momentum and an estimation of your continuing potential.
- The size and long-term prospects for the market you are selling into.
Since people invest for the purpose of realizing growth and returns that are better than other investment opportunities, you and your management team are charged with consistently building shareholder value through profitable corporate growth.
Going public is easier than you think…
Before deciding to go public, you should assess the impact it will have on you and your company and decide whether you are ready to make the necessary commitment -- before, during and after the initial public offering process. The good news is that access to the public capital markets may be much easier than you think.
After you become a public company, investors and securities regulators will expect timely and relevant information about your business and its prospects. As a public company, you must provide information to the public that may be sensitive such as operating results for business segments, compensation of officers, and other material facts.
Depending on where you list, going public need not be a daunting task. However the steps must be well planned. The typical process includes:
- Developing a strategy
- Planning and coordinating the process
- Preparing, finalizing and executing the prospectus - if necessary.
- Identifying a suitable RTO (Reverse Take Over) vehicle - if necessary.
- Completing the transaction and continuing as a public company
Contact Peter Traynor for help with these steps. They are ready to help you through the process of going public!
ITB Solutions Incorporated
Peter Traynor, Principal