5 Key IPO Issues That You Should Know Before Going Public
The Initial Public Offering (IPO) process is the method by which an unlisted company starts selling new or existing securities to the public for the first time.
Before an organization goes through the IPO process, it is considered a private entity that has a limited number of shareholders. However, after an IPO, the company becomes a publicly listed company on the stock exchange.
IPO readiness assessment and pre-IPO advisory services are extremely important in determining whether a company is ready to become public. There is a wide range of IPO issues and challenges that you can use before taking your company public.
Let’s explore the top IPO issues in detail.
1. Fluctuating Share Price
One of the most important things to keep in mind about taking a company public is that its share price will never remain the same. Instead, it will be greatly affected by the fluctuations of the stock market.
Therefore, when considering going public, you must keep these fluctuating share prices and the volatility of the stock market in mind. You cannot expect the share price to always remain high or stable.
A number of external factors will affect the share price of a public company after the IPO. For instance, the share prices of smaller companies are likely to be affected by liquidity.
On the other hand, medium and large-scale companies are affected by overall market expectations and the global economic condition.
Public company managers should be ready to deal with these kinds of changing situations by making sure there is as much communication as possible between investors and other stakeholders.
As a result, the company is able to make smart business decisions for continuous and sustainable growth.
2. Expectations of Public Investors
Public companies must consider the interests and expectations of every public investor. Selling the equity stake during the IPO means the company is choosing to give public shareholders some influence over the business.
Therefore, it is important to pay attention to their opinions and interests after the company goes public.
In other words, the CEO and top management of a public company do not have the same level of autonomy they might have enjoyed before in a private company.
This kind of public influence can even cause some listed companies to make decisions for short-term benefits instead of thinking about long-term business strategies. Therefore, it is vital to strike a balance between satisfying public shareholders and making good business decisions.
3. Legal Compliance and Financial Reporting
Professional audit firms in Singapore facilitate companies throughout the IPO process by offering reliable IPO readiness assessment and pre-IPO advisory services.
Experts can help you in ensuring maximum legal compliance during the IPO process and produce the required financial documents to ensure you don’t run into any legal issues later.
Disclosing financial information and providing comprehensive financial reports to the relevant authorities is essential for companies to complete the IPO implementation process.
Unlike a private company, a public company must disclose the names of its beneficiaries and provide complete information about its finances and development plans.
Thorough financial analysis and IPO readiness assessment are essential to determine the best time to take a company public. Most of the funds spent during the IPO process are typically covered by fundraising.
Yet, an IPO requires significant investment because decisions must be taken at the perfect time to maximize the benefits of a public company.
A significant part of the IPO preparation stage is funded by the company’s resources, so these expenses must be taken into account when carrying out a financial analysis.
Generally, a public company has much more restrictions, rules, and regulations to deal with than a private company. The entire IPO process itself, as well as post-IPO, is bound to bring a lot of responsibilities and restrictions for the management of the company.
Executives are expected to be much more involved in a public company because they will have to look after the entire process of ensuring smooth operations in a public company.
Also, the directors and management of a public company must keep in mind certain legal rules and restrictions to make sure they don’t get in trouble. The different activities of top management in public companies are much more regulated than those of private companies.
The bottom line is that your company might face various types of issues when taking your company public. Getting help from the experts is important to overcome these challenges and mitigate their impact.
The good thing is that comprehensive IPO readiness assessment and pre-IPO advisory services from professional audit firms in Singapore can greatly help you in minimizing the effect of these challenges or avoid them in the first place.