How to Raise Money through Public Offerings

Instructions

• 1

  The goal simply is to increase the capital inflow. A public offering puts a worth on the company’s shares, which can be purchased by interested parties.  A value is attached to the stock, which serves as a currency within the company, and used to expand the business. Once the market decides to buy your shares, it will indicate the company has opened new doors for future financing as well. Moreover, it improves the debt to equity ratio, and allows the company greater leverage from its lenders.
• 2

  Raising capital via the security exchange has positive implications for the owners as they still have the necessary control over the firm. This is because if a privately listed company decides to raise money, it will more or less lose its decision-making grip to investors. For public offerings, the power still rests with the major shareholders or the owners.
• 3

  A major benefit associated with public offerings is that it allows the company a better route to not only promote the venture, but further attract big name investors, executives, professionals, and facilitate acquisition.
• 4

  However, much still depends upon the success of the IPO. Proper planning needs to be done by internally gauging the financial health of the company through its financial statements, incorporating proper marketing tools and establishing bail-out opportunities.
• 5

  A company needs to meet all requirements set by the Security and Exchange commission.  This will include a detailed IPO prospectus, including estimated profit and loss figures for the coming few years.
• 6

  The early phase requires reaching out to well-known investors, mutual fund managers and creating awareness by revealing detailed information regarding growth and future prospects.  Moreover, an IPO further involves investment banks to act as underwriters, where the issuer (the company) has an agreement with an investment bank to sell the shares to the public. Some of the common methods include Best efforts contract, Firm commitment contract and All or none contract. Select the underwriter who places the highest valuation on the price of each share.
• 7

  The process has now been initiated where you will be selecting the trading source or stock exchange market. Submit all the paper work with the SEC, and upon approval, you are ready to raise money through public trading.