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How To Go Public And Raise Capital

Sep 8, 2008
A company can raise capital by going public. When a company goes public, it means that the company is no longer a privately owned company. Instead, a company that goes public will give up equity in the company and offer that percentage for sale. An investment firm or stock exchange will make the sale of the company's stock to the public. Investors make a profit from buying and selling company stocks.

A company must be prepared to go public. During the pre-filing period, a company should inspect its corporate organization, operations, personnel and governance. Tasks related to the company's stock structure, articles of incorporation, relocation and intellectual property should be identified and executed. Other considerations that require attention are related to legal issues, loans, borrowing money, mergers, acquisitions and stock issuances. During this period, it is important to strategize the pre-filing publicity campaign. The company should become familiar with the registration statement.

Accurate and timely accounting procedures are an important factor in going public. Companies must provide financial statements that are reviewed and audited according to SEC requirements and any other necessary related documents. The amount of revenues made will determine how many years back that the company must provide in financial statements.

A company has the opportunity to develop its own stock symbol. When a registration statement is declared effective, the company can be identified in its stock listing by the stock symbol. The stock symbol may not have any similarities with the company logo or name. A company may change its name or stock symbol in its listing at a future date.

In order to go public, a registration statement must be filed with the SEC. When the SEC declares that a registration statement is effective, the waiting period is over. When a company goes public through a reverse merger, it may take as little as two months while going public directly can take up to six months. Once a registration statement is declared effective, it goes through the post effective period.

A business may go public during its start up phase if it shows that it has enough potential for significant growth and a profitable valuation to gain the underwriting services of an investment firm. Such a start up company can gain the capital it needs to become a successful business. It is important to find an investment firm that caters to similar sized companies and has experience with such companies.

Public companies have greater market value than privately owned companies. With a public company, it becomes easier to raise a substantial amount of capital both privately and publicly because of the added prestige. When a company sells company stock, it can use the financing to expand the company or enable the company to participate in more marketing activities. The capital may fund inventory, research and development or be added to the accounts receivable.

The extra attention can give a company a much needed boost into the public eye and pocket. Going public adds value to a company, which makes it much easier tor a company to raise capital for different purposes.
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