Going Public: The Financial Implications of Taking a Company to the Stock Market

Posted on Apr 26, 2023 at 07:04 PM

Going public is a milestone that many companies aspire to reach. It's a sign that your company has grown and is ready for the big leagues. Going public also opens up new capital sources and diversifies your investor base, which can help you take your business to the next level.

The benefits of going public can be substantial, but so are the risks and costs involved. However, going public is essential for firms and businesses on the path to innovation.

In this article, you'll learn more about going public and the advantages of doing so.

What does going public mean?

Going public means a company's founders have sold their shares to the public. It is a way for startup companies to raise money and increase their profile as they become featured in a more prominent family of companies listed on an exchange.

Going public can be an exciting time for a company and its employees. However, it also comes with responsibilities and obligations that need to be met to keep investors confident enough to make the purchase.

Going public typically involves raising money or other funding from investors by selling new shares at the initial public offering (IPO) or stock market listing. This money can then be used to fund growth and expansion plans and allow employees to benefit from share options or bonuses linked to these new funds raised by the company.

By going through this process, companies receive more access to capital so they can grow faster and hire more employees. More importantly, it allows shareholders to sell or invest their stocks if they want to do so at any time. 

What are The benefits of going public?

Going public is not just about raising money; it also gives you access to capital markets and provides liquidity for your company's shareholders. When you go public, you're opening your business up to the world and attracting new clients who may have never heard of you.

You can learn more about the right way to go public through finance training courses in Dubai. However, these are some of the advantages of going public:

• Increased Capital for Growth 

Companies can use their newly-acquired capital to fund growth initiatives, such as expanding their product line or acquiring other companies. This can also help them grow into new markets or regions where they previously needed access to capital (like silicon valley).

•  Improved Valuation

This is perhaps one of the main reasons entrepreneurs want to go public – it allows them to get better valuations for their companies at IPOs time than when trying to raise money privately. This is especially true if regulatory pressure on banks to lend less money makes it harder for private companies to raise funds from banks.

• More Liquidity 

Going public allows employees and early investors who hold stock options or restricted stock units (RSUs) to sell some or all of their holdings on the open market without waiting until they vest (which could be years away).

• Greater visibility

Public companies are more visible than private ones because their share price is tracked by financial analysts and investors regularly. As a result, they also have greater visibility with customers and suppliers than private companies, including more opportunities and unique offerings.

What are the financial implications of going public?

In a friendly tone: The financial implications of going public are complex, but they can be broken down into two categories: financing and liquidity.

• Financing

Going public means your company will have access to more capital than ever. This can be used to expand operations or fund new product development. It also allows you to pay off any debt you may have accumulated. 

However, it does commonly come with some restrictions. As a publicly traded company, you must report your financial performance to directors quarterly and file annual reports; this may require finance training to ensure success. 

• Liquidity

When companies go public, their shares become available on the open market for anyone to buy or sell. In other words, you now have a ready-made way of turning your equity stake into cash or selling it altogether if someone offers you an attractive price.

The disadvantages of going public 

Going public is a significant milestone for any company. It can be a profitable investment for shareholders, allowing staff to benefit from the company's success.

However, there are many disadvantages of going public, including:

• Public scrutiny

By going public, you're making yourself accountable to shareholders and investors who will closely monitor your progress in making decisions and strategies. This means you must ensure that everything you do is above board and legal.

• Increased responsibilities

 Going public means more responsibility for senior management, who are now legally responsible for the success or failure of the company. They must also ensure that they maintain appropriate standards of corporate governance; otherwise, they will be held accountable for any decision they make.

• New pressures

 Once a business is listed on the stock exchange, its financial performance becomes public knowledge, putting pressure on management to perform well to keep their jobs! Viewers and followers of the finance industry will also keep an eye on 

Going public can have a groundbreaking social impact on any firm; while going public can be a great way to attract investment dollars, it also comes with some profound financial implications. That's why you must carefully weigh your options before going public.

Now that you know which action to take and which mistakes to escape from, you’re ready to take your company to the next step.