Penny Wise Really is Pound Foolish When You Are Taking Your Company Public
By Jeffrey Stanger, ITB Solutions Incorporated
The old phrase ‘You get what you pay for’ is never truer than when owners of private companies decide that it is time to take the next step and go the public route on a stock exchange.
The kind of habitual frugality many entrepreneurs develop that is so necessary when boot-strapping a young company from its uncertain nascence into a self-sustaining corporate entity, is an admirable ethic that can, unfortunately, outlive its usefulness.
It’s great to understand the value of a dollar, but when parting with a buck becomes something you have a knee-jerk resistance to – even when there is demonstrable value to be gained for doing so – it’s good to consider that you may be reaching a plateau in your effectiveness as a business person.
This is something we see in the capital markets on a frequent basis. “I want to get to the next level and launch a successful publicly traded company.” Okay great, you will need an experienced team of professionals to get you there, including consultants, a securities lawyer, an auditing group, an Investor Relations professional, and others. “Whoa! That will cost too much, let’s do it cheaper.” That last sentence really means: “Let’s do it with a LESS capable and experienced team that will NOT be able to accomplish a successful public listing, an investment raise, and ongoing success in the markets. That way I will save money.” Right, you will save money in the short term. And you will almost certainly NOT achieve any of your goals.
Professionals in the capital markets have skillsets and a network that take many years to hone and develop and which are not readily available. Business people who have great and in depth knowledge of their business space almost invariably have very limited understanding of the public markets. The “DIY” mentality is a recipe for disaster. You may as well decide to perform your own gall bladder operation or be your own lawyer when it comes to a court matter as scrimp on the necessary professionals to take your company public.
We are not talking about exorbitant expense. Simply the reasonable remuneration for experienced professionals with rare skills who are delivering out-sized value to you.
When going public on a stock exchange and raising capital it is important to recognize all the pieces that are needed to put together to have a successful listing and positive results going forward.
Some of the pieces are:
- Share Structure– Whether this is developed for an IPO or a Reverse Take Over.
- Method – Choosing the best method of going public, such as an IPO, Non-Offering Prospectus or an RTO, will require choosing the right investment dealer or sourcing out the right shell company.
- Presentation Materials – A solid 1-pager and a compelling pitch deck are essential.
- Financing – You need to have the right valuation and determine whether or not the investors are willing to follow your goals in developing the company.
- Regulatory Documentation – Preparing documentation should not be a burden and the process can be painless and cost effective with the right professionals.
- Investor Relations Program – This should include offline as well as an online program. It’s best to prepare and plan at least a month ahead of your listing date.
- Market Maker- Develop relationships with market makers that can enhance liquidity in your stock.
In the final analysis, you have already been a success at building your company to the point of readiness for the public markets. Don’t put an end to that success by not being prepared to reach the next level.
Since 2005 ITB Solutions has provided listings development services to stock Exchanges in Canada such as the Canadian Securities Exchange. ITB Solutions currently provides New Listing Services to the NEO Exchange. We assist companies with the listing application and managing the process to become publicly tradable in Canada, as well as offering advice on how to make the most of your public listing.
ITB Solutions Incorporated
Jeffrey Stanger, President