At some point in a company's growth cycle, it becomes prudent to consider the advantages of being publicly traded. In addition to the higher profile and prestige with customers, suppliers, employees and the financial community, there are other compelling benefits.
Access to Capital Markets
One of the most obvious benefits is access to the capital markets. Raising capital as a public company offers investors the benefit of liquidity of their investment, and hence, a viable exit strategy. For this reason, public companies are normally valued higher than private companies. Even if the stock of a public company trades in low volumes, there is at least an illusion of liquidity, which makes financiers more comfortable with making an investment.
Private Placements
Additionally, it is usually much easier for a public company to raise money through a private offering after that company is trading. Private Placement in Public Equities (PIPE) has become a more popular and effective method of raising capital for smaller and medium size companies.
Attract and Retain High Level Management
Stock and stock options have more value, and can be very effective tools in attracting and keeping top quality management.
Growth Through Acquisition
Acquisitions can now be fully or partially financed by stock, opening up more opportunities to grow a business quickly to reach critical mass.
Founders Net Worth
A public offering usually boosts the personal net worth of the company's shareholders. Stories abound of multi-millionaires created through public offerings. Shareholders of a newly trading company can more easily obtain liquid cash either by selling a portion of their publicly traded stock or by using this stock as collateral for loans.
