Short-term, going public can increase business valuations substantially, often by 300% to 500% or more. This is because publicly traded companies are valued based on future earnings, provide investors with a path to liquidate their investment, provide a high level of business disclosures which make investors more comfortable, and have unique ways to prevent a total loss of business value.
Long-term, public company valuations are substantially higher because the entrepreneur can use their stock, options and warrants to complete acquisitions, attract the best talent, close more deals and raise capital more easily, which amplifies their effort, accelerates their growth and enables smart entrepreneurs to create more value.
Raise Capital
It's faster, easier and less dilutive.
When a company has a clear path and timeline to go public by direct listing, reverse merger or IPO, it is faster, easier and less dilutive to raise capital.
After a company is publicly traded, it is even faster, easier and less dilutive to raise capital from a larger audience of public debt and equity investors who have interest in wider array of investment structures.
As an investor, would you rather invest in a private company, or invest in that same company a few months before going public?
Align Interests
Motivate employees and third-parties.
As a public company, it's easier to attract, motivate and reward people through the use of stock options and warrants. This is particularly valuable for industries that rely on building a large independent or commissioned sales force, or for industries where there's strong competition for talent.
In addition to the use of stock options for employees, the use of warrants can be extremely valuable when issued as part of a growth strategy to sales, marketing, distribution and business development partners.
Acquisitions
The best reason to go public!
Many of our clients are 'growth by acquisition' entrepreneurs, who go public because it's easier to source acquisition opportunities, structure more favorable transaction terms, raise capital to finance themselves more efficiently, and attract better talent than they could as a privately held company.
Going public to acquire private companies that are already profitable is the fastest and most reliable way to build a large and valuable business. More on growing through acquisitions.
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