Why Do Companies Go Public?
When a private company decides to go public it is most usually offered to the public through an IPO or initial public offering. There are advantages and disadvantages to going public. Most consider it very advantageous.
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Awareness
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Going public raises awareness for the company. It increases its profile and prestige, and it offers helpful free publicity for the company.
Raises Capital
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Going public allows a company to raise funds and capital for its business. Whether the company is looking to expand, to do research, to make acquisitions, to pay off debt or to fund current business, going public gives the company access to funds.
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Exit for Current Owners
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When a person, employee, officer or director of a company owns stock in a private company it is very illiquid. Going public allows these individuals the chance to sell their shares and possibly reap rich rewards.
Mergers and Acquisitions
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When a company is public it is often more attractive as a take-over target or as an acquisition candidate. Public companies are easier to find and research for potential and ownership.
Future Capital
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Once a company has gone public it is easier to raise capital in the future. A public company can go back to the public market for a secondary offering to raise more cash.
Disadvantages
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Some companies prefer to remain private to protect their confidentiality, limit the sharing of their profits, avoid lengthy reporting and certain liabilities.
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