Regulation A+ and Other Alternatives to a Traditional IPO

CHAPTER 1Why Go Public?

Before deciding how to go public, a company must decide whether to go public. As I often tell my clients, if you can benefit from being public, and can bear the costs of becoming so, you should seriously consider it, regardless of your company's stage of development.

Advantages of Being Public

In general, there are five major advantages to being public: easier access to capital, greater liquidity, ability to grow through acquisitions or strategic partnerships, ability to use stock options to attract and retain senior executives, and increased shareholder confidence in management.

Access to Capital

It is easier for public companies to raise money than it is for private companies. Regardless of the merits of any specific private company, public companies have five characteristics that make them more attractive to investors than private companies.

First, by law most public companies must disclose their financial results (good or bad) and other material developments to the SEC and the public regularly and in great detail. Disclosure requirements build investor confidence because it is harder for a public company to hide problems than it is for a private one to do so.

The second major benefit to investors is that there are more opportunities for a public company to create liquidity for their investment. This increases a public company's access to capital. Those who invest in private companies always worry about the “exit strategy” and look for companies ...