Inexpensive Methods for Taking a Company Public
Perhaps the greatest barrier to making money is having money. Every person can become his/her own investor if they just keep their eyes open to opportunities. The struggle is that most folks, once an interesting investment crosses their path, would likely not have the finances to take advantage of a unique opportunity. This is just as true for taking your company public as it is for traditional investing. There needs to be an affordable, simple and straight-forward method for going public that is available to more of the common business owners. Making public offerings affordable for nearly any business will continue to be a necessary tool for providing easier access to public capital and an alternative option for investor and entrepreneur exit.
Why inexpensive options for going public are absolutely necessary
While it does cost money to perform a public offering, making it affordable for a larger swath of U.S. businesses for at least some of the following reasons:
- Cheap access to capital for growth and working capital needs.
- Wealth creation through investor exit.
- Tax sheltering options through creative public company structuring.
- Small business growth through mergers and acquisitions via public stock.
The gap between the rich and the poor is ever-widening. Bridging that gap will not occur without the buy-in and assistance from creative solutions across the economic value-chain. One such solution includes the ability for companies and entrepreneurs to go public more often and at a lower cost. The problem for many companies is that they either don’t know where to go to become publicly-traded, won’t be able to afford most “go public” offering services or are concerned of the skills required to ensure complete compliance once the company is public.
While on the high-horse, trumpeting the need for affordable public offer solutions, it is almost just as or more important to discuss the on-going costs of being a public company.
In the process of assessing private-to-public offerings we do a great deal of work with many private companies whose financials have been prepared by various CPAs and accounting firms. A recent client struck me as odd as they were paying over $80,000 a year for outsourced accounting assistance. The accountants were not PCAOB compliant, the financial statements were not in complete accordance with GAAP and the company did less than $1 million in EBITDA a year. Per our suggestion, the company quickly changed accounting firms and got this bill down to a more reasonable $12,000 a year cost.
Similar treatment more often occurs with public companies, but in a more extreme way. Because of the regular need for on-going quarterly and annual reporting to the SEC, many companies expect their outside accounting and securities compliance costs to be much higher than they actually should be. So, cost-consciousness in the process of going public and in the process of being public are perhaps the two most important consideration factors in ensuring smaller companies have access to the public markets in a cost-effective way.
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