The Benefits of Going Public

Becoming a public company has more long-term advantages than disadvantages.
Among the benefits of going public are increased company valuation, greater access to capital, the ability to make acquisitions and mergers using stock, pay off debt, increased liquidity for company shareholders and investors, greater chances of attracting and retaining quality employees and more.
Company Valuation Increases When a company goes public, its market value goes up.
Typically, the value of a private company is about four to six times its earnings, while that of a public company can reach up to twenty times its earnings.
The abrupt and considerable increase in the net worth of a company's shareholders and founders that comes with going public explains why private companies that are on the verge of being sold suddenly go public.
By doing so, they can be sold at a significantly higher price.
Going public is not just about achieving greater valuation but also gaining greater access to capital.
As a rule, the majority of investment bankers, funds and venture capitalists would rather invest in a public company than in a private company.
This is because of three other major factors in addition to company stability;

• their ability to sell stock to investors at a price that is less than the quoted market price.
  
• their transparency in reporting requirements.
  
• the liquidity that they offer to investors.
  

In addition to that, public companies are much more capable of going to public markets for bond issues or raising capital through stocks as well as converting debt to equity.
Going public does not only allow a company to become more visible to potential investors but also provides it with a benchmark value to raise its capital against.
Another long-term benefit of trading publicly is less ownership dilution.
While it is a given that public companies have higher valuation than private companies, it follows that the percentage of stock that the former needs to give up is relatively less than what the latter needs to sell just to raise the same amount of money.
Not to mention, capital raised from an IPO (Initial Public Offering) or subsequent stock offering need not be repaid, as is the case with a bank loan.
Use Stock for Mergers and Acquisitions In addition to the fact that it is less expensive to make acquisitions publicly, public companies also have the privilege of utilizing their stocks to make or grow their assets, including through mergers and acquisitions.
Another positive aspect of the stock options that public companies have available is using company stocks to attract and retain high quality employees.
In terms of liquidity, public companies are also more highly valued by investors than private companies are.
Apart from the idea that stock in public company is more attractive for estate planning, investors are more likely to buy and sell stocks readily in public companies than in private companies because the public stock is liquid, i.
e.
easier to transfer or sell.
Moreover, investors understand that owning stock in a public company makes borrowing and eliminating personal guarantees a lot easier for the management, thus providing every company shareholder not just a diverse portfolio but a valuable exit strategy as well.
While it is true that going public demands more transparency of previously private business and financial information, the benefits are many.
The company valuation increases by simply becoming a public company thus heightening its ability to raise capital for expansion, mergers and acquisitions or to erase debts.
There is also the ability to use stocks instead of money as compensation for key personnel.
One must draw their own conclusions on whether or not going public is right for their company but clearly there is great potential for both short and long-term rewards.