What are the pros and cons of company's IPO Should company be floated Essay

What ar the pros and cons of unions IPO Should company be floated at all - Essay ExampleAlthough the luff of growth is to bring benefits to the company, there exist both pros and cons that can arise from this surgical process of going exoteric (Helwege 2004, p.541). Pros and cons of Initial Public Offer (IPO) in that location argon several advantages that accrue to a company by going public. As mentioned above, the principal advantage is the financial benefit through raising capital. An IPO adds a value on the companys stock. In addition, those insiders retaining stock are able to sell their shares or even use them as collateral (Datta 2000, p.715). Going public overly creates a currency type in the form of its stock, which can be used in making acquisitions. In addition, there is a possibility that the company can access the capital markets for its future financing needs. Overall, a companys debt-to-equity ratio improves considerably after an initial public offering, which in dicates that the business is likely to earn to a greater extent favorable loan terms from its lenders (Datta 2000, p. 716). Another advantage is the increase of public sentience of the company. IPOs normally produce more publicity by increasing the awareness of their products to a new group of potential customers. Subsequently this is expected to increase the companys market share. The founders can alike use the IPO as an exit strategy. Many venture capitalists have tried this in an attempt to open up successful companies (Hao 2007, p.112). For others, the prestige associated with the public companies or a invest of a director or officer of any public company has a certain allure. Furthermore, going public puts the company ahead for promotion. The publicly traded companies are mostly better known than non-publicly traded ones. The company can gain publicity and a stable show by trading publicly. This makes the public companies offer a wide variety of stock, which has a considera ble potential of significant appreciation in value. Those companies entrust trade publicly and portray a positive image hence attracting highly qualified personnel at all levels of management. It is possible to view such companies as growth-oriented hence their duty is to answer to a get along of directors and shareholders who in turn demand increased profitability as frequent as possible, and also act quickly to solve managerial problems and also supplant those senior executives who are performing poorly (Benninga 2005, p.117). Although the benefits of an IPO are many, there are certain challenges. One outstanding challenge is the disclosure of information to investors. There is a high cost of complying with the regulatory requirements. Other costs that leave alone also arise include the generation of financial reporting documents and audit fees (Hao 2007, p.112). This will subject the public companies to added pressure of the market. This may force them to focus mainly on shor t-term results rather than their long-term growth. Since the investor is keen on profits, management will be under scrutiny. This may trigger the management to engage in questionable practices in order to increase earnings. Another setback of going public is that these public companies operate under precise scrutiny. There is disclosure of confidential information touching on the company including those transactions with management the prospectus divulges preliminary violation of security law and executive compensation. This may be confidential information belonging to the company that it may be reluctant to reveal. Furthermore, formalisation of the decision-making process follows and with less flexibility when the shareholders are also there. This may bring complexities to these companies. Previously, decision making was quite flexible due to the presence of few people. The company is also subject to