Liquidity Options: Initial Public Offering

Initial Public Offerings are not exit vehicles for owner/managers. An IPO requires a fully staffed management team that can withstand the scrutiny of Wall Street analysts.  Additionally, the cost of compliance with Sarbanes-Oxley is prohibitive for most private companies.

 

Benefits of an IPO

  • Enables the Company’s shareholders to retain equity.
  • Some liquidity available for majority shareholders.
  • Add-on acquisition(s) could be funded largely with “new currency” (public stock).

Drawbacks to an IPO

  • Requires a minimum market capitalization of $200 million to have an active float with institutional following and investment.
  • Substantial, upfront marketing/preparation costs ($500,000 or more).
  • Not an exit strategy – financially or personally.
  • Requires complete management infrastructure with public company experience.
  • Sarbanes-Oxley compliance ($400,000 - $500,000)