Going public means a private company is releasing shares for sale to the public, allowing anyone to own a share and vote on company decisions. It provides access to capital but also creates risks. The process involves identifying a need for capital, locating an underwriter, and deciding when to make the announcement. Companies can decide the percentage of shares to release and can make additional offers later. Timing is crucial, as financial markets are volatile.
When a company is said to “go public,” it is releasing private shares for sale to members of the public for the first time. Private companies are controlled and controlled by a limited number of shareholders, such as members of the same family. Public companies have shares available for purchase by anyone, giving members of the general public the opportunity to own a share and vote on company decisions. The process of going public is long and requires several steps. Private companies are often scrutinized for signs that they may be about to go public.
Companies generally decide to go public because they need capital. By selling shares, a company can access a ready source of financing. Going public can facilitate expansion, project development, and other endeavors by the company. It also creates risks, as having publicly traded shares can make companies vulnerable to takeovers, as well as other decisions made by shareholders, such as ousters of board members.
Also known as an initial public offering, the process of going public typically begins when a company identifies a need for capital and locates an underwriter. Underwriters are companies that agree to purchase the offering, usually at a discount rate, for resale to the public. Underwriters are involved in the process of deciding when to make the announcement and how to promote the IPO, with the goal of selling the stock offering as quickly as possible.
The decision to go public does not force a company to sell itself entirely. Companies can decide the percentage of shares they want to release to members of the public and can make additional offers later, if necessary. Once the stock is sold in the initial public offering, it enters the secondary market, where individuals trade shares with one another. Companies do not get a share of the profits from sales on the secondary market, although they may benefit from increased share value. Having valuable stock can make it easier to access financing and other necessities.
A company chooses the timing of the decision to make the care public. Financial markets are notoriously volatile. Selecting the wrong day to release a stock offering can spell disaster for a company. Even the most careful planning can go awry if events intervene to depress or confuse the market on the day a company is scheduled to go public.
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