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What to know about an IPO

On Behalf of | Oct 7, 2020 | Business, Business and Commercial Law |

Private companies in New York may opt to become publicly traded entities. A business will typically go public as a means of attracting additional capital or as a way to allow early investors to sell their stake in the organization.

The process of going public

The first step on the journey to an initial public offering (IPO) is to determine how many shares will be sold. You must also decide how much those shares will be worth and find a firm that is willing to underwrite them. An underwriter is the legal owner of those shares until they are sold, and that party’s goal is to sell them to the public for more than what they are worth prior to the IPO. Prior to making the decision to engage in the IPO process, you must make sure that your company is eligible to be listed on a stock exchange and that it has enough money to cover IPO expenses.

The Potential Downfalls of Being a Publicly Traded Company

A publicly-traded company will face pressure to reduce costs and take other steps to maximize each shareholder’s return on investment. When you decide to sell shares to the public, you will likely lose some or all control over how the company is managed. Furthermore, your business will likely need to make financial statements and other records available to shareholders and other parties.

Taking your company public may increase your brand’s reach and increase the amount of money it can spend to increase its market share. However, the process of transitioning from a private to a public business can be long and complex. Therefore, you may want to retain a business attorney to help make the transition an easier one.