What is an IPO and how does it work?
Bringing your company to market can be a great way to raise the capital to grow your business, but can be a daunting process. So where do you start?
An Initial Public Offering (or IPO) is when a company makes its shares available to purchase by the general public on a stockmarket for the first time. In doing this, a private company becomes a public company, hence the term ‘going public’. In theory the IPO is a way for the company to make money based on expectations of future success and profit.
It is easier than ever to qualify for an IPO and be publically listed. As a company, you no longer need such a lengthy financial record and there is more demand for smaller, high quality companies on the stock market.
What are the other benefits of ‘going public’?
There are other benefits to having an IPO other than raising capital. Taking your company public can attract media attention and help to raise its profile/boost sales. Furthermore, as shares are open to the public, employees of your company are able to invest. Knowing that the better the company performs, the more their shares go up in value, there is potential for higher motivation in employees and in turn higher efficiency in their work as well as an increase in staff loyalty (e.g. reduction in staff turnover).
Once public, there are stricter rules and increased scrutiny, however this usually leads to public companies getting better rates when they issue debt. Also, after the company has gone public you can always issue more stock, this opens doors for mergers and acquisition as stock can be issued as part of the deal.
What else should you know?
Along with public companies being subject to stricter rules and regulation than private companies, it can also be challenging to keep all of your new shareholders happy. In preparation for your company’s IPO you need to make sure all of your documentation is up to date and presentable enough to attract new investors. There can also be significant costs when going public, however if the IPO meets expectations, you will have a new source of funding.
How can we help?
Beaufort’s Capital Markets team appreciates that no one understands your business better than you do, but starting the process of an IPO can be both challenging and time consuming. We are here to support you through the flotation process. With over 20 years of experience as a corporate and institutional broker, Beaufort has helped many companies through each stage of an IPO. We can support you through any financial and regulatory challenges and help put your company in the right market at the right valuation.