Five factors that an entrepreneur would consider before going public
In deciding whether to go public, a-corporation must determine whether it is realistically in a position to support a successful public offering. The following are some of the factors that should be considered in the decision making process and are elements that could prove critical to the success of the offering.
-Potential
While it is clear that ideal candidates for successful public offerings are companies with a consistent record of growth over several years, many development Stage companies with innovative products and services (such as in the software, Internet or biotechnology sectors) have successfully raised funds based on the potential of their business and management. Thus, a corporation with a short financial history can attract investor interest by showing a strong momentum in sales and profits and by being able to identify anticipated growth opportunities and competitive advantages.
-Size
A corporation must have a market value after the issue that is large enough to attract institutional investors.
Assets
A corporation must have either a solid net worth supported by tangible assets or, if technology based, Proprietary intellectual property with strong business prospects. The quality of a corporation?s patent portfolio and other intellectual property protection is critical
Business plan
A corporation must think about its long term business goals and whether going public is the best way to finance its growth .Prospective underwriters and investors as well as securities regulators, will require that a corporation have a clear plan for the use of the proceeds from the issue. On occasion, a two-step process whereby a smaller, private placement precedes the initial public offering may be more appropriate and financially advantageous, as if may reduce dilution to the founding shareholders.
Market
The going public process is typically heavily influenced by precedent. Having a good .grasp of a corporation?s industry and market, as well as its competitive strengths and weaknesses, is critical to building a credible "case" with underwriters and potential investors
Management and board of directors
A corporation?s management roust possess sufficient depth and experience to carry out a successful public offering. Prospective underwriters and investors are particularly interested in the strength of the management team. A corporation must therefore ensure that management is willing and able to assume the responsibilities involved in going public. In addition, changes, to the bound of directors and the establishment of appropriate committees of the board are very often acquired. Board of directors plays a significant role in both the management of public companies and in their public image.
A corporation will often need to add to its board individuals, with experience expertise, expertise or the necessary independence.
Corporate structure and governance
A corporation must consider whether its existing corporate,-capital, management and governance structures are appropriate for a public corporation, as well as whether all of its corporate records and contracts are in order.
Internal controls
A corporation must have internal controls, systems and procedures that are capable of supporting the demands associated with both the process of going public and the requirements to report reliable financial information to investors following the public issue.
marto answered the question on February 4, 2019 at 07:49
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