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Going Public: Taking Your Company to the Next Level

The stock market is ascending towards a new high, and has doubled in the last 4 years since hitting the bottom of a dip. This is good news for many who want to have their company participate in an IPO. In spite of Facebook’s falling price, the company made many people billionaires and millionaires as soon as shares began selling. This is the hope and dream of many hard working individuals who want to reap the rewards of taking their company public.

A Short History of Public Offerings

The first known public stocks were held jointly by ancient Rome’s government and select companies, both small and large, where fluctuations in stock prices occurred. In fact, the great Roman orator Cicero made mention of the value of one stock rising.

It is believed that stocks existed in Asia, but there seems to be little evidence detailing how any stock system worked.

In 1250, reference to 96 shares of a French publicly held stock was found, while in Sweden in 1288, a mining and forestry company was noted to have distributed shares for its company. In 1531 the first stock market as an institution began in Antwerp, Belgium.

Most famously, though, were the shares sold in England by the East India Trading Company on December 31, 1600. As a joint-stock company, with shares held by both government and private citizens, it gained special favor and was given complete monopoly on trading with India for a period of 15 years, allowing it to dominate all India-related trade for that duration.

Though the Philadelphia Stock Exchange was born a little earlier, the New York Stock Exchange (NYSE) opened for business in 1792 and quickly became more powerful than its Philadelphia counterpart. Wall Street became its home, and it soon became the largest and most powerful exchange in the world, essentially without competition for two centuries. With the advent of computers, the NASDAQ rose to prominence, and, while it has more companies listed, it has remained second to the NYSE. But, this electronic-based stock trading platform forced the NYSE to merge with Euronext to form the first trans-Atlantic exchange. Still, the NYSE remains the most important and powerful exchange in the world.

Benefits of Taking Your Company Public

The term “going public” describes the process in which you convert your privately held company into a publicly traded- and owned one through the issuance of shares of stock that can be purchased by the public. Not every business owner pursues this avenue, but it is often the goal for many start-ups for the following reasons:

  • It increases exposure of your company
  • It provides you with access to the public capital market
  • It increases your company’s credibility
  • It creates wealth among original investors
  • It allows for expansion and growth due to increased capital

Process for Going Public

Staging an Initial Public Offering (IPO) is very time-consuming and quite expensive. If you are interested in going public with your company, you will first need to fill out a complex set of application forms with the Securities and Exchange Commission (SEC). This can be a difficult time for the management of your company because the process can take from 6 months to a couple of years to be processed, while still having to run your company.

The process:

1)      Weigh your options. Meet with your board, accountant, attorney and management team to discuss the possibility and feasibility of going public.

2)      Have an independent auditor audit your records.

3)      File registration statement, which is released publicly immediately, though you are unable to sell public shares just yet, and other related documents with the SEC. They are

  1. Part I – The Prospectus: This describes your business, the financials, and details your management team. Anyone who invests in your company must have access to this document.
  2. Part II – This is additional information about your company that does not have to be delivered to prospective investors, though is available from the SEC upon request. Following

There are other forms that may need to be filled and filed along the way, such as an S1 for those who seek to raise up to $10 million, or, an SB1 or SB2 for those seeking to raise an unlimited amount of cash.

Next, you will need to file any state and National Association of Securities Dealers documents so an escrow can be created to store monies in, and then for later disperse. Subsequent to this, you may then distribute Part I of your prospectus and print stock certificates, announce offering and price, and begin selling shares.

The Cost of Going Public

You should expect your legal, underwriting, printing, and accounting costs to be as low as $50,000 to as high as $250,000. However, expect additional costs to soar, including increased executive pay and benefits, as well as additional accounting costs. On average, expect an additional $2.5 million dollars to your company’s cost structure.

Selling Shares

Part of the process of generating excitement about your company’s IPO is doing what is called a “roadshow” where you and your management team travel the country to meet and greet important investors, banks, like Goldman Sachs, financial planners, like the Wall Street Steward, and the media. Once this has been done and you have received approval from the SEC, you can begin selling shares via the exchange you become a member of. You have finally made it and are reaping the benefits of going public. Now the real hard works begins.

From the team at RevenWriters

 

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Stocks Plummet on Nuclear Crisis Worries

U.S. stock marketClick the chart for more market data. By Annalyn Censky, staff reporterMarch 15, 2011: 12:53 PM ET

NEW YORK (CNNMoney) — Four days after a deadly earthquake rocked Japan, fears about a nuclear crisis in the country are hammering financial markets.

Stocks plunged worldwide, with the Dow industrials sinking nearly 300 points shortly after the open Tuesday. Jittery investors flocked to the perceived safety of Treasuries and the U.S. dollar, while commodities fell sharply from their recent highs.

In mid-day trading, the Dow Jones industrial average (INDU) was down 212 points or 1.8%, after falling as much as 297 points earlier. All 30 of the Dow’s components were in the red. The S&P 500 (SPX) fell 22 points, or 1.7%; and the Nasdaq (COMP) dropped 46 points, or 1.7%.

The sharp sell-off follows a 10.6% drop in Japan’s Nikkei index (NKY) earlier in the day. Other Asian markets finished lower Tuesday, with the Shanghai composite losing 1.4%, and Hong Kong’s Hang Seng index falling 2.9%.

European markets also closed sharply lower. Germany’s DAX dropped 3.4%, while France’s CAC-40 lost 2.3% and Britain’s FT-100 retreated 1.3%.

Markets are still reeling from the staggering human and economic toll from Japan’s 9.0-measure earthquake and subsequent tsunami on Friday, which killed at least 2,475 people. Another 3,000 remain missing.

The earthquake also damaged Japan’s Fukushima Daiichi nuclear power plant, and subsequent explosions and fires there have only escalated fears about a nuclear crisis in Japan. Over the past two trading days, the Nikkei shed 16.1% — its worst two-day loss since 1987.

The Japanese nuclear plant that exploded is equipped with reactors designed by Dow component General Electric (GE, Fortune 500), its shares fell 2.5% Tuesday.

Insurance companies in the S&P 500 tanked, led by Aflac (AFL, Fortune 500) which tumbled 8.2%. Aflac generated about 75% of its revenue in Japan last year.

Hartford Financial Services Group (HIG, Fortune 500) also fell 4.7%, Prudential (PRU, Fortune 500) dropped 4.1% and MetLife (MET, Fortune 500) fell 4%.

“The U.S. market is pricing in a worst-case scenario with the nuclear situation,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

“The concerns about radiation — and what that could mean for loss of life — could make this a more globalized crisis rather than a centralized disaster,” he added.

The Japanese government has taken steps to shore up the nation’s financial system. But investors remain nervous about the short-term outlook for the world’s third-largest economy.

Wall Street’s most widely cited measure of volatility, the VIX (VIX) surged nearly 15%.

Ahead of the opening bell, steep losses in world markets triggered the New York Stock Exchange to invoke Rule 48 — which gives the exchange the right to pause trading in the event of exteme volatility.

NYSE typically invokes the rule several times each year.

Meanwhile, oil prices fell 2% as investors pulled back after its recent run, and gold prices fell 2%.

The dollar rose versus the euro and the British pound, but fell slightly against the yen. Like the U.S. dollar, the yen is also considered a safe-haven asset in times of economic uncertainty.

The price on the benchmark 10-year U.S. Treasury rose as investors sought the safety of government debt, pushing the yield down to 3.29% from 3.35% late Monday.

Amid the volatility Tuesday, investors will also watch for the U.S. Federal Reserve‘s policy statement in the afternoon.

The central bank’s Federal Open Market Committee is not expected to discuss any changes to interest rates or its asset purchase program. To top of page

 

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