Why firm should consider Initial Public offer (IPO)
Initial public offer is considered to be an avenue for companies to go public. In the past few years, there has been a rise in the number of companies that have undertaken the process. However, there is discussion as to whether going public for companies is the best solution and also the benefits the firms enjoy from the IPOs. In the course of our analysis, we shall discuss at length whether taking your corporation public is a goal that you ought to consider. IPO has been a good platform for many firms’ growth in the market.
It’s a Source of capital for the firm
Firms that are considering going public are always motivated to increase the sources of the capital which the company has at the moment. For instance, the rise of Facebook rose from an unprecedented IPO, which was done by the firm in the year 2012. The firm managed to raise a colossal $ 16 billion, which also made Mark Zuckerberg a multi-billionaire after the completion of the process. It’s a major source of boost which a private firm investor would want to ensure the firm pursues all the key plans and the projects which had projected (Wertz, 2020). Others firm which had undertaken the process has also boosted its capital muscle which is key to the firm growth. Most of the firms have been facing the risk of liquidation in the market, and therefore there is a need for the firm to increase the capital, which the firm has to enhance its operations.
It enhances public Image
Before the IPO for Facebook in 2012, only a few people knew the company, but immediately, then firm announced that it was going public, there was a surge in the market as more investors came on board. Stock markets give a good platform for the listed firm to be known by many more investors and potential customers in the market, which works positively for the company (Voices, 2018). More suppliers are willing to supply the raw materials which are needed in the firm, which could enhance growth. It’s beneficial for the firm, which goes public. In the recent survey, it indicates that most of the firm which undertook an IPO have entered the international market two years after the process.
It facilitates mergers and acquisitions
Synergy in the market is very important for the firms, and there are firms which have been struggling to gets synergy in the market through mergers and acquisition. For instance, it would help the company to boost its capital in the market and also increase the level of the expertise which is needed for the firm growth in the market. When the company goes public through the IPO, such a firm can carry out mergers and acquisitions, which they need to enhance growth (Taulli, 2018). There will be valuation in the market, which will be characterized by market drive forces, which could give a good allowance for the firm. Most of the firms which have entered into merger are likely to grow bigger and there reach in the international.
Despite the benefits which come with the firm going public, it’s important to consider several factors that each firm should before the process is undertaken in the market. It is an important decision that should be taken after consultation with all the key stakeholders in the firm.
A company should always consider its potential in the market before it decides to go public, and this would help reduces all the necessary conflicts which arise when the firm undertakes the process. There is a cost that comes with IPO, and the firm should be willing to cater to the cost before it could decide to go public (Taulli, 2018). In addition to that, the firm should also consider its size in terms of the employees and assets of the firm. There are small firms which have been categorized as a medium-size firm, and they have fewer capabilities about their size in the market. Such a firm should not consider deciding to go public. Also, to add on that is that the board of the director and key management team should own the process and ensure its undertaken in the best interest of the firm to avoid confusion and premature failure in the market.
Conclusion
Initial Public offer is an important goal that firms in the market should pursue to enjoy key benefits that come with a listing of the company. However, the firm should be prepared since a firm is expected to disclose key aspects, which include earnings and also the books of the accounts to the public, which is unlike the private firms. There is a need to be more transparent in the market and promote corporate governance in the firm. On the other hand, there are some challenges which the firm is expected to face after going public, and they should be prepared to handle such challenges.
References
Taulli, T. (2018). How An IPO Really Works. Forbes. Retrieved 19 April 2020, from https://www.forbes.com/sites/tomtaulli/2018/06/10/how-an-ipo-really-works/#75622729872a.
Voices, V. (2018). Why It’s Time To Go Public — Even When Staying Private Has Never Been Easier. Forbes. Retrieved 19 April 2020, from https://www.forbes.com/sites/valleyvoices/2018/02/23/why-its-time-to-go-public/#86310b6694d3.
Wertz, J. (2020). Is Taking Your Company Public A Goal You Should Strive For?. Forbes. Retrieved 19 April 2020, from https://www.forbes.com/sites/jiawertz/2020/01/25/taking-company-public-goal-should-strive-for/#3ccd773fbd62.