THERE ARE DISADVANTAGES TOO !
Loss of Confidentiality; Public Reporting
If the company trades on any of the higher public exchanges it will be obligated to file regular reports on its business and financial condition with the Securities and Exchange Commission ( SEC ), which is the government body that regulates US public companies. The time, expense and disclosure of corporate information required of SEC reporting companies can be discouraging to those who are used to keeping their corporate affairs private and will require accountability not required of public companies.
Part of the price you pay for being public.
Maintenance Costs
Because of periodic reporting requirements of the SEC, most public companies will have to incur more costs, including annual audits of their financial condition, legal costs for SEC filings and costs to market their publicly traded stock.
Dilution of Equity
By the nature of public status, an amount of the owner' s equity must be given up in order for there to be a public " float" or group of shares that are trading in the open market. However, this is a small price to pay in view of the greater market value generally achieved and the other benefits. Remember, it' s always better to own " a smaller piece of a larger pie." USF can show you specific examples of how the much higher valuation of your ownership merely by being public actually gives you a HIGHER value for your stock, even after you give up stock to outside investors.
Officer and Director Liability
The exposure and visibility of being public brings with it greater scrutiny from your public and outside stockholders. You also have a much larger number of stockholders, often several thousand, once you have an active market in your shares. While liabilities can in most cases be protected by insurance, management' s actions must be more circumspect at all times.
In summary, becoming and maintaining a public presence requires a significant commitment of resources and capital.....but it has its rewards. Any company must recognise the advantages and disadvantages and must ensure it has the capacity to be public at all times..
HOW TO BECOME PUBLICLY TRADED IN THE US.
There are several methods of becoming publicly traded, including the traditional underwritten Initial Public Offering ( IPO ); purchasing a public shell company ( this is a company that is trading on a public market, but no longer has a business or assets in it ); or a self registration process of some of the company' s shares for public sale and then listing them directly on a stock exchange ( Direct listing ).
In todays public market the purchase of a public shell company has been the primary method of going public and current market conditions mean that it can be the most cost effective and speedy method of becoming a publicly quoted company in the US.
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