Why Romancing With The Idea Of IPO Could Be Bad For A Company?

While many entrepreneurs today romance with the idea of taking their companies public, IPO is not always a great option. It comes with a range of disadvantages like loss of management control, privacy and shift in business approach. And if the companies’ owners are fine with these terms, IPOs could be great. If not, business loan and private equity firm could be a better alternative to raise the capital.

We’re still three months away from 2017 and this year has already seen 64 IPOs (Initial Public Offerings). Two more and this will be the highest number of IPOs in India in the past 9 years. The number clearly suggests just how popular this capital-raising avenue has become for the private firms. In fact, to put it bluntly, many entrepreneurs actually dream of seeing their company’s name in the stock market. They are basically romancing with the idea of “going public”. Endearing!

But another fact is, IPOs are not necessarily the best idea for every business. Even, at times, it could be very risky that could stake the existence of what once was a flourishing private company. The Great Recession made this very clear. Some of world’s top companies went bankrupt in 2008, including the infamous Lehman Brothers.

Of course, end of the existence and going bankrupt are the extreme cases. But there are few other factors that make IPOs not such a dreamy option. Instead hedge fund, private equity fund and business loan Kolkata could be far better options.

Here are 3 important factors that make IPOs not such a great option for every business; factors that every business person must keep in their mind before approaching one of the investment banking companies in India.

Loss of control-

Loss of privacy- As a public firm, the company is needed to disclose every big and small detail- right from it decisions to its financial standing. This might not be appealing for many for a host of reasons. One in particular is that excess disclosure can give the competitors an edge; they might use it to their own advantage and exploit the weakness of this now-public firm.

Business approach shifts- Not many consider this but after going public, the business approach changes — and that too unconsciously. The company, which once was formed to serve the consumers and to become “the best” in the industry, now basically works for the shareholders. The management team now has to focus their time and energy just as much on the shareholders as they do on their products/services.

These are 3 big disadvantages of going for IPOs. The company’s owners and founders would have to compromise on their management control, privacy and business goals.

Unless the capital required is just too huge and no banks are ready to grant the loan for whatever reason, IPOs are definitely the right way to stride. However, with the emergence of top financial companies in the country, applying and getting business loan Kolkata has become relatively easier.

So the owners of the private firms must think things through before making any move. There are stakes in going public and it might not be a suitable option for everyone, even in the same industry. Business loan and private equity fund are the better alternatives.

Consulting investment banking companies in India is a great solution to know in IPOs is any good for that particular company.