Improve business results - 04:38, 2007-Sep-11 |
Improving business results should always be a main goal of any business, and can be realized with one or more of the following activities: a) More sales, by
b) Less cost, by
An excerpt from PlanMagic Business
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Public markets used to be available only to larger companies with a long history of profitability. Nowadays a variety of companies with varying degrees of profitability and revenue growth may be candidates for public financing depending mainly on future prospects. Access to capital growth through public markets offers greater access to capital, but many promising small companies cannot obtain funding because they are private. Without funding though, they can't hope to grow to the size and scale that would allow them to go public. Because of this hopeless cycle, many will turn to venture capitalists, angel investors, bank loans or SBA secured loans for that initial cash injection. And then the road to going public may be opened.
If the company has never sold stock before it is known as an Initial Public Offering (IPO). A company can only have one Initial Public Offering (IPO). If the corporation has sold stock before, it is known as a Primary Offering. A company can have many Primary Offerings. When a company needs to raise capital, they issue debt securities (bonds) or by selling stock (equity).
There are in general three ways to go public:
1) Traditional underwriting
Avg. time: 8 to 12 months
Avg. cost: $150,000 to $500,000
Capital: Can raise more capital than other types of transactions.
2) Reverse merger or buying an existing 'public shell'
Avg. time: 2 to 8 weeks
Avg. cost: $150,000 to $500,000
Capital: Does not raise money, but stock is valued and tradable.
3) Merging with a 'custom made' public company
Avg. time: 4 to 8 months
Avg. cost: $100,000 to $150,000
Capital: Can raise money, and stock is valued and tradable
THE IPO PROCESS
The most common method of going public is through an Initial Public Offering (IPO). The process involves retaining an underwriter (endorses the request for a public offering), securities lawyer (ensures proper filings, documents and registrations) and auditor (provides audited financials, and ensures the correct transition to public company accounting). This group of people is also referred to as the IPO team.
Often the underwriter is an investment bank, which acts as advisor and distributor. Underwriting is the actual process of raising capital through debt or equity. The company seeking to raise capital doesn't necessarily need to use an investment bank or underwriter, but someone has to sell the stocks or bonds.
Before appointing an IPO team (which is costly), it is advisable to properly assess the potential of the company and its chances to successfully complete an IPO.
Once the IPO team is appointed and all paperwork has been completed, it will probably take a minimum of 90 days to complete the transition. A registration statement has to be prepared which is reviewed by the SEC and other regulators who can approve the company going public. Once filing has been done, the underwriter starts to offer the securities to potential market makers (the road show) seeking subscriptions to purchase the company's shares. If the subscriptions are sufficient, the underwriting becomes 'firm'. The IPO is then closed, the company is made public, and the company receives its portion of the proceeds.
- audit the company's financials
- establish a price
- create a timeline
- identify underwriters and brokerage firms for the related industry
- establish contact with a selection of underwriters
- build up interest from investment firms
- establish firm relationships with investors
- register statements and file with SEC
IPO ARTICLES (by E-Analytics)
IPO filings - Detailed information about current IPO filings with the SEC.
Overview of IPO process - This article describes the process and steps involved in taking a company public.
Costs incurred - This article describes the costs incurred by the company when taking a company public.
Choosing The IPO Underwriter - Selecting the right underwriter.
IPO Underwriting Agreement - The terms, warranties and covenants of the underwriting agreement and prospectus.
The IPO Road Show - About one month prior to the offering date to the public, top management of the company is going to have to travel to attend meetings with institutional investors and analysts.
Pricing an IPO - The factors an underwriter considers when determining at what level to price the stock.
The Initial Public Offering closing - This paper discusses what happens at the closing (successful registration).
Producing an Annual Report - Considerations for the public company when crafting the annual report.
IPO RESOURCES