Barry Kitain, a business attorney at Lauletta Birnbaum, LLC, and associate professor at Rutgers–Camden School of Law, sounds off on taking your company public, from the expense to why size matters to potentially pursuing other options.
1. GOING PUBILIC IS FOR THE SELECT FEW: While there is a certain allure to the notion of taking your company public, as a realistic financing option, it is not for everyone. In a good year, there are only about 1,000 initial public offerings (IPOs) conducted, and less than 1 percent of the nation’s businesses are public.
2. GOING PUBLIC IS EXPENSIVE: You will need to assemble a team of professionals, including underwriters, attorneys and accountants. An IPO typically costs in excess of $100,000 in professional fees.
3. REPORTING REQUIREMENTS: To go public a company needs to produce audited financial statements and be prepared to continue to provide quarterly and audited annual reports on an ongoing basis.
4. SIZE MATTERS: It is very difficult to do an IPO for less than $25 million. The transaction costs are too high for smaller offerings, and it will be difficult to find a good underwriter to take on an offering smaller, because the underwriter will not be able to earn enough given the work it will have to put in.
5. THERE ARE OTHER OPTIONS: Consider private offerings to private equity or venture funds, crowdfunding or do-it-yourself public offerings. Talk to your legal and financial advisors to explore what path may be best for you.
Published (and copyrighted) in South Jersey Biz, Volume 4, Issue 8 (August, 2014).
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