Should You IPO?
A recent post on CFO.com asked “Should You IPO?”
The author, Keith Button, concludes that “Unless your company is big, profitable, and a category leader, the wisest choice may be to wait.”
Button shares three reasons why most companies should wait to go public:
1. No Need – Two of the primary reasons for going public are to raise capital and provide liquidity to shareholders. For most companies that have some traction already, funding from private sources (VC, PE, Angels, etc.) is readily available. There are also a number of methods to provide liquidity for shareholders other than an IPO.
2. Bigness Required – While there are more IPO options today than there were 15 years ago, most of today’s successful IPOs are done by much larger firms. The author shares an example of Amazon’s successful public offering in 1997 raising $54 million (The company’s revenues were only $16 million in the quarter it debuted, and the business was unprofitable) and Snap’s “unsuccessful” IPO in 2017 which, in contrast, raised $3.5 billion.
3. Held to Account – If a companies team isn’t ready to be held accountable and take criticism from public investors then IPOing could result in pressures that have a significant negative impact on the team and company.
Read the entire post on CFO.com HERE.
Do you think most companies should hold off on an IPO until they are big an profitable? Why might a smaller company choose to IPO? Let us know in the comments below and on social media!