subject: What it takes to take a company public in United States [print this page] As the world number one economy center in the world most people want to do business in America. Bringing their business in this country means a boost to their capital and income growth. America can offer a lot of opportunity, especially in the area of business. But recently America has been in a recession and their economy is struggling. Many more people are jobless and business has dropped. The market has fallen 40% in less than a year according to the office of the president. Millions of homeowners who played by the rules cant meet their mortgage payments and face foreclosure as the value of their homes have plummeted. But, the American economy seems to be turning around and improving a bit.
There are different ways to do business in America. Their government also offers some programs that might help you. IPO (Initial Public Offering) is the most well known approach. But this process is also the most costly, the most risky and most disruptive to the business, and can take a year or more to complete.
Hundreds of thousands of dollars sometimes must be invested in the process without any certainty that the IPO will be successful. The IPO is best for well-seasoned start-ups. The main advantage, of course, is that you raise new money if the process is successful.
The Direct Public Offering is another method; its a sort of a scaled-down version of the IPO, more suited to many companies that are not as far along in their business development as the typical IPO candidate. The cost of a DPO is typically much less than the cost of an IPO; however, the process is still labor-intensive for the companys management.
Another process to go public in US is a Reverse Merge. This refers to an alternative strategy by which a private company seeks and acquires a public listing and becomes a publicity traded company. In this process, a private company merges with a public company and continues as the dominant successor entity. The private merges into a public company and obtains the majority of its stock. Once the merger is consummated, the post-merger, combined entity changes its name to that of the private company, appointing and electing key officers and directors. The advantages of public trading status notably include the possibility of a greater likelihood of capital formation. Going public through a reverse merger allows a private company to go public rather relatively quickly, at a substantially lesser cost and with less resultant dilution than traditional initial public offering or direct public offering strategies.
There are benefits to Being Public. Why are private companies interested in going public? These are the reasons; to raise capital quickly and more easily, to form mergers, to acquire other companies, to gain more media attention, to enhance their corporate image, to provide their shareholders with liquidity, to facilitate corporate borrowing from banks, to provide employee stock option benefits and compensation and to create wealth for the founders and original investors.
Founders of private companies want to take their company public for some benefits, these are; to create significant wealth for themselves, to obtain loans from financial institutions using their stock as collateral, to increase the liquidity of the shares they own, to gain prestige and respect in their community, to improve access and raise capital from the public, to grow their business through mergers and acquisitions and to reduce the need for venture capital and bank financing.
What it takes to take a company public in United States
