The top 4 benefits of going public (besides access to capital)

As you may recall from my last post on September 18th, the 3 most overlooked and impactful consequences of going public are reflected in the loss of:

1. Quick decisions;

2. Control and confidentiality;

3. Low-key processes.

Here are the top 4 benefits of going public, besides the obvious and essential one of broader access to capital and future financing opportunities:

1. Company valuation on a continual and cost-effective basis;

2. Enhanced credibility;

3. Required discipline assists companies in transition;

4. Shares can be used as a currency substitute.

The issuance of shares to the public affords a continual (and, once public, cost-effective) form of valuation. The public company’s total value of shares can easily be determined at any point in time by multiplying the price per share by the number of outstanding shares.

Financial institutions may concede more favourable lending terms to a public company than to a private one. Because of disclosure requirements and the highly regulated environment, available information on the public company tends to be more standardized and complete than what is voluntarily provided by a private company. Generally, this gives lenders a higher comfort level.

Public companies are required to have a high level of discipline, an obligation that can often prove quite valuable. A highly disciplined environment driven by financial performance can help rapidly growing companies transition from the “entrepreneurial phase” to a more mature phase.

A public company is able to use its shares instead of cash to acquire other companies, an approach that may allow for a more timely and cost-effective completion of mergers and acquisitions.

In the next of my 3-part Going Public posts, I will address Three Clever Alternatives to Issuing Shares when the Company’s Stock Price Is Low.

For more detailed information about going public and equity financing in general, see The Decision-Maker’s Guide to Long-Term Financing – available at www.guidetolongtermfinancing.com.

P.S. In response to overwhelming requests, I now provide the PDF version of my book for free with the purchase of a paperback copy. This offer applies no matter when you purchased the paperback. Just e-mail a copy of your amazon order confirmation to kathrin.ohle@twigenergy.com, and I’ll send you the PDF. Easy.