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Why go public?

Growing companies constantly search for new capital. Going public is one way to obtain that capital, but it takes time and money—and a lot of both!

Your decision to go public should follow from your longer-term strategic objectives—seeking opportunities for growth, value creation, or an exit strategy. It’s a big decision. You will need to have a clear understanding of the process and assess the impact it will have on you and your company.

Some of the advantages

  • Access to capital
  • Going public provides opportunity for growth and expansion of your business by offering a wider range of sources to raise capital. You may want to finance key acquisitions, retire existing debt, buy out existing shareholders, invest in research and development, or move into larger and more diverse markets.
  • Improved financial status
  • Going public increases your company’s equity base and creates more leverage for financing growth.

The disadvantages

  • Increased scrutiny and accountability
  • As a public company, you lose privacy in matters related to your company’s business operations, competition, executive officers’ compensation, material contracts, and customers. Extensive public disclosure rules require details in public offerings and continuous disclosure documents, such as the MD&A. As a public company, the information you must provide to the public is also available to your competition. Some of this information may be sensitive (e.g., operating results for the company or geographic segments, compensation of senior officers).
  • You are also under constant pressure to meet market expectations and explain the decisions made and actions undertaken to your shareholders and different players in the market.
  • Increased demands on time and resources
  • Going public creates extensive new reporting requirements, including preparing and filing annual and quarterly financial statements, MD&A, the AIF, and CEO/CFO certifications on disclosure controls and procedures as well as internal control over financial reporting.
  • Loss of control
  • An IPO dilutes the ownership of the company. At the IPO stage, the owners can make certain that they maintain control after the completion of the IPO by ensuring they continue to hold the majority of the voting shares. Future public financings or issuing shares for acquisitions will dilute their ownership percentage, and create the possibility that the original owners will lose future control

Read more on “Going Public” brochure provided by KPMG

Discussion Questions:

  1. If you own a Private company would you consider Going Public?
  2. Visit Sedar.com to review a Canadian Public company, determine if you would consider being the major shareholder of this Public company.
  3. Do you see any significant advantages to Going Public?

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