An IPO (initial public offering) is the process where a business converts from being privately owned to having shareholders from the general public market. It can be a high-profile thing, for instance when very famous companies like Facebook and Snapchat decided to go public and it was big news, or it can be something a smaller business does.
In both cases, the idea is to raise capital to help the business grow or achieve new things.
How Do Companies Prepare for an IPO?
A company preparing for an IPO works with a corporate broker. These are businesses like WHIreland who can help a company prepare in legal and procedural terms to both attract and keep investors. Often, businesses that have been privately owned for some time have fairly lax processes that have grown organically, and which don’t pass muster when it comes to investors. Newer businesses, too, often don’t understand exactly what they need to do from a compliance and process perspective to become viable prospects for investors. Effectively, gearing up to do a public launch of a business means working with some experts who can recommend what needs to be done to make the company ‘investor ready’, and then a process of implementing any required changes. Obviously, this isn’t an overnight thing, but it can be done fairly quickly.
Is It the Best Capital Raising Option?
For a lot of businesses, an IPO is a great way to raise funds and doesn’t have the same workload involved as other options like crowdfunding. It can also be a better option for established businesses looking to change and grow than things like venture capital, where investors want to see new, innovative ideas rather than businesses that are proven but want a boost of capital to move to a new level.
An IPO isn’t always the right decision, but if a business is reaching a point where it needs a decent cash injection to continue and is prepared to put some work in to make itself appealing to investors, it is generally a move that can pay off.
Of course, an IPO can also be something that makes for a pretty exciting time for the owners of the company, as they make the transition to being a public company and strategise as a business with shareholders rather than a private entity.