Question

Please discuss of some of the benefits and drawbacks of "going public" (200)words)

Answer 1

Completing an IPO will often involve significant changes to corporate, capital and management structures, and once public, a company will be subject to a number of rules and reporting obligations. With a host of benefits—as well as costs—the decision to go public requires careful consideration.

Going public has considerable benefits:

• A value for securities can be established
• Increased access to capital-raising opportunities (both public and private financings) and expansion of investor base
• Liquidity for investors is enhanced since securities can be traded through a public market.
• Publicly traded securities are attractive for certain other purposes (as transaction currency or executive and employee compensation, for example)
• Credibility and visibility with the public is enhanced, as is the corporate image
• Lower cost of capital relative to debt financing

Disadvantages of going publie:

• The Process Can Be Expensive

• Pay Attention to Equity Dilution

• Loss of Management Control

• Increased Regulatory Oversight

• Enhanced Reporting Requirements

• Increased Liability is Possible