Factors to Consider Prior to Taking Your Company Public

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Factors to Consider Prior to Taking Your Company Public

Prior to taking your company public, there are a number of factors to consider. It would be to your benefit to find out which of your competitors have gone public, and how their shares have performed. If you would like people to invest in your company, you will need to provide them with an estimate of the rate at which your company will grow, and supply them with the numbers that support that growth.

Advisers Who Can Help You

The Securities & Exchange Commission (SEC) has many reporting requirements of those who wish to take their company public. For this reason, it is advisable that you employ the services of an attorney and someone who is versed in SEC reporting. In addition, if you decide to offer your employees stock options in an effort to gain their loyalty, you may wish to hire human resources specialists who are skilled in assembling benefits packages that include stock.

Once your company goes public, your board of directors will assume a more conspicuous role, in which case it is imperative that you align yourself with the right people.

Determine the Level of Interest from Investors

If you would like to receive constructive criticism on your initial public offering (IPO) prior to taking your company public, you may wish to consider participating in the program created by the Jumpstart Our Business Startups (JOBS) Act. This law was passed in April 2012 by the federal government. It permits companies to secretly file for their IPOs, receive feedback from the SEC, and hold meetings with possible investors. Business owners can “test the waters” before entering the market, and avoid spending over $100,000 simply to determine whether there is enough interest in their stock offering.

Prior to the passage of the JOBS Act in 2012, business owners were forbidden to speak with potential investors until after they filed their IPO documents. Thus, they were required to spend hundreds of thousands of dollars on legal fees, due diligence, compliance, and accounting before even having a chance to communicate with possible investors.

Transparency & Fair Disclosure

Upon going public, you will be under increased pressure to maintain transparency and fair disclosure. Public companies are required to be very cautious about the ways in which they reveal news that could affect their stock price. As of April 2013, companies have the permission of the SEC to make significant announcements; however, investors must be notified first.

Seeking Legal Advice

When taking your company public, you should consult a business attorney who can draft investor agreements between you and investors who purchase stock in your company. It is also advisable to hire an attorney who can review your company’s annual report, which consists of several financial disclosures and statements regarding your company’s performance and goals.

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Last Modified: 06-30-2015 10:22 AM PDT

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