Why take your business public?

There are various reasons why you and your business might want to go public. Access to capital is the obvious one, but there is also evidence that publicly traded companies tend towards a higher value than their private company counterparts. There are also status implications for the entrepreneur (i.e. improved), the potential ability to expand faster, and becoming a public company allows you to offer a more liquid stock incentivisation plan to those all important "key employees".

  • Access to capital
  • Higher market value
  • Wealth and status
  • Expansion plans
  • I've been there

Access to capital

This may be the most obvious reason for going public and is certainly likely to be up there among your top three. If you don't need extra capital - now, or in the future - why go public in the first place? A publicly traded company has access to a wider range of investors than a private company. If you are intent on growing your business then the access to capital afforded by going public may be crucial in supporting that growth.

Higher market value

The reason publicly traded companies tend towards a higher market value than their private company counterparts is, for starters, that investors are willing to pay a premium for the ability to re-sell their shares on a public market. They also value the fact that they can make relatively easy comparisons of value with other companies in the sector. And public companies are also more highly regulated than private companies - they have a duty to provide information to investors.

Wealth and status

This is the big one for many entrepreneurs. Increasing your personal wealth as a result of the ability to cash in your shares may well have been the driving force behind setting up the business in the first place. However, it really must not be the driving force behind going public. Think whether it is right for the business, not just whether it is right for you. But from a business perspective, a public company will generally have greater status, prestige and credibility than a private company. Merely saying that you are a public company adds an element of authority that can benefit all aspects of the business.

Expansion plans

Publicly traded shares are valuable currency when it comes to making acquisitions or agreeing mergers. In fact, in boom times your company will be at a distinct disadvantage if it is not publicly traded.

I've been there

"We decided to go public as we needed funds to expand our development programme," says David Bramhill, managing director of Nighthawk Energy. "The £10m raised enabled us to continue the execution of a major drilling and development programme on the Cisco Springs project. The project has been very successful to date and provides a valuable upside in our portfolio. The ability to raise funds and provide a tangible value for investors were also important factors in coming to the market."

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