Important Things to Consider Before Taking Your Company Public
Taking your company public means the initial public offering (IPO) of your private business. Businesses go public to raise profits and pursue their expansion, making it a publicly-traded and controlled business. Investors can also use IPOs as an escape strategy —a way to take out their investments in a business.
If your company is preparing for an IPO, here are some important things to consider before taking your company public.
Your Company’s Value Proposition
The first important thing to consider before taking your company public is your company’s value proposition. Analyze whether investors have an interest in hearing the story of your company. Also, investors want to know how fast you will grow and what number you will generate. They will want to know what long-term plans you will have and what are the things you’re willing to do for the business that your competitors can’t.
With that, try to research and learn from competitors’ experiences if they have succeeded in going public. After that, put together your own story, starting with growth opportunities.
Your Company’s Structure, Key Contacts, and Relationships
Next in line is your company’s structure, key contracts, and business relationships. Control arrangements when the business makes an IPO dismiss contracts and business relationships. It’s also good to note that some loan agreements need lenders’ approval before releasing a stock offer. Thus, when a company makes an IPO, stock sale contracts can allow the transfer of preferred stock or the motion of contract redemption terms. After this, all contracts undergo a thorough evaluation to ensure it won’t be a stumbling block.
Your Company’s Finances
The third most important thing to consider before taking your company public is your finances. Does your company have the money for an IPO to succeed? Note that legal and financial expenses alone range from $200 000 and can reach up to $500 000. On top of that, there’s a 7% lender’s fee, marketing, and other expenses. Some successful IPOs go at least $ 2. 5 million to succeed with going public.
Your Company’s Financial Staffs
Besides your finances, it would help if you also consider your financial staff before taking your company public. Hong Kong Incorporation Service Providers suggest recruiting a legal counsel and an investor-relations professional. These are representatives with knowledge in Security & Exchange Commission regulation. The reason for this is because of the reporting standards of the SEC.
Your Company’s Board of Directors
Another important thing to consider before taking your company public is your board of directors. Being a public business, your company’s board of directors will also be visible. Thus, having the right team is important. You will also need board committees with different duties such as auditing and payroll. It will be ideal to start choosing and hiring new board members at least a year before filing for an IPO.
The Managerial and Administrative Personnel
Aside from the board of directors, it would also be best to consider managerial and administrative personnel before taking your company public. Try to analyze if your company’s management and administrative personnel are in place. These are personnel who have highly recommended expertise in running a public business. During the “roadshow,” these people should be effective advocates in marketing your company.
Your Company’s Shareholders
Another consideration that must be given equal importance before taking your company public is your shareholders. Filling an IPO puts limits on controlling major shareholders’ percentage in shared capital and voting interests. Moreover, transaction rights are also restricted, such as the need to approve specific decisions by shareholders.
The Transparency Requirements
You should also never forget the issues on transparency before taking your company public. Going public raises the demand for transparency and equal disclosure. Nowadays, where every business has a Twitter account and a Facebook page, public businesses need to be cautious. It would be best if you put extra precaution on how you share the news that could influence your business.
Your Other Options
Finally, going public isn’t the best option to profit from the money and efforts you invested in your business. There are other alternatives, and one is what business people termed as “double-tracking.” It is a method by which a company plans for an IPO while actively selling itself in the private sector. After all, exhausting all your other options before taking your company public is worth a try.
Suppose you have plans to file an IPO and take your company public, consider the points mentioned above. If you aren’t that confident about your decision, get a response to your legal issues. Your concerns about how an IPO can affect your business can be resolved by a professional Hong Kong Incorporation Service Provider. Contact 3E Accounting Hong Kong and have all your concerns ironed out.