‘Going public’ is a colloquial term which refers to a business’ transition from a ‘private’ status – where business ownership is shared between a small number of private shareholders – to ‘public’, whereby shares of the business are made publicly available to a wider investing community through the London Stock Exchange. This is accomplished via a process known as an IPO, or Initial Public Offering, and is a significant decision to make with regard to any company’s future for a variety of reasons. In short, going public presents an opportunity for a business to grow rapidly from a swift injection of cash, where growth may otherwise have been difficult with a limited number of private investors. The move is risky, for reasons we will discuss shortly, but the process is relatively straightforward.
The Process of Going Public
Before you make the decision to go public with your business, you will need to ensure it fulfils key metrics to guarantee a successful IPO. These metrics relate to the business’ operational quality and health; indicators of longevity and continued success, such as a robust financial record and a clear, actionable company mission.
The next step is to build a team to action your IPO. Firstly, you will need a team of lawyers to cover the necessary legal documentation and research, while the services of professional auditing consultants can ensure your business’ finances and operations are in perfect shape before you go ahead. An investment bank will be your route to the stock market, acting as an intermediating broker for your business and also a sponsor for your eventual listing. Generally speaking, the route to IPO readiness is around 6 months.
The next step is to present something known as a ‘prospectus’ to the London Stock Exchange; this is a pamphlet of information about the company, its financial standing, future aims and reason for its IPO, and is also used by prospective investors. Once the Financial Conduct Authority has approved the prospectus, marketing can begin – and once investor interest has been realised, an initial share price is agreed by your company and trading can begin.
The Pros and Cons of Going Public
The main advantage of publicly trading shares in your business is the large short-term injection of money your business receives. This money, from the selling of shares, enables you to realise growth strategies otherwise inaccessible to you, from major expansions to upgrading of crucial technologies, whether in manufacture or delivery of output. However, trading publicly places additional strains on your business, from transparency measures to ensure shareholders can make informed decisions, to changes in the style of ownership and management. Ultimately, the decision to go public is not one to be taken lightly – but could work for your business where growth is simply an investment away.