Advantages to being a public company:
- Public markets provide the strongest levers for the highest possible valuation.
- Stockholders have a mechanism to access liquidity.
- Key investors, employees, and others can monetize their investment.
- Company access to capital markets for future capital raises (either debt or equity).
- Ability to use publicly traded stock for executive incentive compensation.
- Attract and reward key employees (and provide long-term liquidity).
- Credibility with suppliers and customers.
Disadvantages to being a public company:
- Costs of going public (both monetary and management’s time and attention).
- Increased ongoing costs (starting at around $1.0M to $1.5M per year).
- Managing external investors, including pressures for short-term performance.
- Required disclosure of sensitive information to “the world,” including financial performance, customer information, executive compensation and beneficial ownership by stakeholders and insiders (for large stockholders, directors and principal executive officers).
- Greater regulation of, and greater risk of liability associated with, public disclosures to investors.
- Loss of control over Company’s value and reputation.
- According to a recent PricewaterhouseCoopers study, estimated average percentages of total recurring incremental costs of being a public company are:
- Incremental Audit: 32%
- Publicity/IR, HR, IT: 22%
- Financial Reporting: 18%
- Legal: 16%
- Regulatory Compliance: 12%