Going for the IPO – Is your company ready?

 

Going for the IPO – Is your company ready?

Taking a company public through an IPO can be a big step for continued growth. Renaissance Capital says the typical newly public company sees its share price rise by about 31% from its IPO price. Even though the prospects of public attention and an influx of money can be very tempting for business owners, it is still very important to sit down and seriously consider if your company is ready.

Theoretically, you can take a business public at any time, but launching an IPO at the wrong time can really hinder the company’s future prospects if things go wrong. If you’re considering taking your company public, talk with a business and commercial lawyer before you do. In the meantime, here’s a list of considerations to think about while deciding if your company is ready for an IPO.

  1. Vision: People are not going to invest in a company if it has few growth prospects or if it has a product or service that is relatively mundane or uninteresting. Investors are also going to want to see a long-term strategy for the company and innovation plans, especially if the market is saturated with competitors.
  2. Transparency: A public company is fully exposed to the world and is responsible for the fair disclosure of information via social media and other platforms. They also have to be aware that certain news might affect the price of their stock. If your company is not particularly social media savvy or comfortable with communications, it might be best to avoid an IPO for the present time.
  3. Management:  Many people look at the strength of the team and board of directors while making an investment decision. A public company must have experienced leadership that is dedicated to complying with regulations on financial reports and has an interest in sticking with the company for the future. A public company also is subject to board of director requirements and must have board committees assigned to different tasks.
  4. Market: Even the most promising IPO can be quickly derailed in a bad market. A market in decline usually sees a reduction in the number of IPOs because the market window closes. A company must be comfortable in projecting market trends and be prepared to modify timetables or plans if necessary, especially if economic conditions are worsening.
  5. Finances: One of the trickiest tasks for a newly public company is complying with SEC regulations. Experts usually suggest hiring a specialist in investor relations and human resource professionals to manage SEC reporting and stock options for employees. It is probably best to put a company IPO on hold if you are not ready to hire an outside expert or are not willing to go along with SEC reporting requirements for public companies.

There is a lot to think about when getting a company ready for an IPO. An experienced business attorney will be able to offer guidance and advice to you and your company. Working with a lawyer will also give you the chance to ask questions about different aspects of an IPO and discuss other options, like dual tracking. For further guidance, contact Willcox, Buyck & Williams, P.A. today for a consultation.