Is There an Optimal Moment to Go Public With Your Company?
CEOs frequently contact me to enquire about the ideal revenue and net profit levels before to going public. It's as if there is some universal threshold that private companies must reach before they can be considered for the transition to the public market.
Given that going public does not necessitate a certain level of sales or net profit, the question then becomes: when is the optimal moment to do it?
Whenever it is not absolutely necessary or when your business is not in dire need of capital to stay afloat, to put it simply.
On the contrary, you want to raise money to fund expansion and growth, or you want to use the public shares as money to buy other businesses.
However, we shall examine certain enquiries made by CEOs who have contacted me in an effort to go public, since life isn't always ideal.
When planning to go public, what are the ideal levels of revenue and net profit? Even if a firm has been profitable for five years running, that doesn't mean it should go public.
This company's CEO contacted me not long ago; the company's net profit and revenues have been stable over the past five years, but they pale in comparison to the IPOs that are happening on the NASDAQ BB and Pink Sheets right now.
Despite this, I failed to observe any improvement in either net profit or revenues, and the CEO seemed unsure of the sources of future growth.
I warned him against going public if his only motivation was to brag to his buddies about being the CEO of a publicly traded firm.
However, he would be in a great position to become an excellent candidate for an IPO if he could formulate a growth strategy and create a business plan detailing his plans to increase sales and net income.
On the other hand, consider a business that has been in the red for five years running, but whose income is increasing year over year and its losses are shrinking.
Going public is a component of this company's business strategy, which includes a business plan and annual expansion targets. The company is meeting these aims. So, one of these two companies do you think has a better shot at becoming a publicly traded success?
Prospects for future growth are continually being sought after by investors. So, they'll choose the business that they think will bring in the most money down the road.
Another common scenario I see is CEOs wishing to go public but lacking the funds to cover audit and legal expenses.
Proceeds from an initial public offering (IPO) must cover specific costs. Many CEOs choose reverse mergers as they are the quickest route to becoming public; nonetheless, public shells can be quite costly and may be the most expensive option.
Any private firm looking to buy a public shell must first verify the shell's clean record and ensure it does not have any outstanding legal issues.
A lack of familiarity with the public arena is a common reason why private companies overlook the due diligence procedure.
This leads them to frequently follow the advice of the shell owner and give in to his demands. The haste with which some businesses choose to go public usually ends up costing them dearly. If CEOs are already set on a reverse merger or have bought Shell without conducting adequate due diligence, I always offer them alternatives, such as a direct public offering, regulation D, or initial public offering (IPO).
I will do all in my power to make it work, but the CEO needs to know what dangers lie ahead and how to avoid them. In the event that he has many shareholders and a large number of outstanding shares, for instance, he will need to reverse split the shares in order to decrease the amount of shares that may be sold, including the shares owned by the owner of Shell.
The private firm would be making a huge error if it complies with the Shell owner's demand that it sign an agreement not to reverse the share before the sale.
Additionally, when an investor relations firm is paid in stock to handle public relations for a company, the investor will see a short-term uptick in interest in the company's shares before selling them off.
whether you want to make sure an IR business is legit, you should ask for their client list and look at their stock chart to see whether there was a spike in the price of their shares followed by a precipitous decline when they started selling them.
There is no "right" time to go public; nonetheless, getting your financials audited is a good first step in becoming ready. Rather than paying the hefty sum all at once, you can spread it out over time by doing this as you go.
If your company plan doesn't represent your ideals and your notion of what would work, you won't be able to keep to it. So, make sure your plan reflects these things.
Verify that the business strategy is solid and adaptable enough to accommodate course corrections as needed. Similar to a road map, a business plan shows where you want to go and how you want to get there; yet, there may be occasions when you need to deviate from the planned path.
Small businesses don't need specialists; instead, they need workers who can juggle multiple tasks at once to avoid paying for unnecessary staffing increases.
Keep in mind that no one knows your business better than you do, but that there are some rules of conduct and values that all businesses must follow.
"Do unto others and you would have them to unto you" is the golden rule, and if you merely follow it, you will have accomplished your part. Why? Because your actions always yield results.
Carefully consider who you do business with. If you are not prepared to go public, there are many dishonest people in the shell and consulting industries who will try to sell you the idea.
You won't even realise it until they've sold you a Corporate Shell and everything else they can think of. By the time you realise it, it might be too late, and you'll be contacting a real consultant for assistance.
A CEO contacted me not long ago; his modest but expanding company was trading for pennies on the dollar due to the more than 150,000,000 shares outstanding, but he needed funding to fuel the expansion.
Nobody will invest in a company that is so dilutive, so I proposed he reverse split before I approached my financing contacts. He explained that he had an arrangement with the shell owner that prevented him from reversing the shares.
Make sure you're getting the whole flow when you acquire a shell, and that the public doesn't own a lot of shares.
If not, think about other options for going public. Going public via a reverse merger isn't your only option.
Before you take any action, consider all of your options; reverse merger might not be the best one for everyone. It may be time to seek for a new consultant if their expertise is limited to Reverse Merger. There is no right time to go public; doing so takes planning ahead, having a clear vision for the future of your firm, and a strong will to succeed.
Please visit our website at your earliest convenience if you are prepared to expand your business or have any questions: Genesis Corporate Advisors, http://www.genesiscorporateadvisors.com?
