Why Does a Company Decide to Go Public?

Most privately-owned companies want to go public and offer stock in an initial public offering because it is a representation of a milestone. There is a lot of reasons for a company to decide to go public, such as reducing debt and obtaining various financial chances.

Moreover, having a public company reduces the overall cost of capital which gives the company a better position when discussing interest rates with banks interest rates on existing debt the company may have could be reduced.

The main reason a company decides to go public is to raise a lot of money. In addition, spreading the burden of ownership is particularly important when a company grows, with the initial founders having to cash some of their gains while still keeping a majority of the business.

The biggest benefit for a business to have its shares securities publicly traded is to have its assets available on the stock exchange.

Advantages for a Company Having Listed Stock

In addition to the recognition that a business receives when its stock is listed on the stock exchange, other benefits for the firm include:
• Additional Funds -be able to raise additional funds through the issuance of more stocks
• Offer securities — Companies can offer securities for other companies
• Additional leverage — When obtaining loans from financial institutions, companies can be offered additional leverage.
• Market exposure — getting the stock of a company listed on an exchange will catch the attention of mutual and pension funds, market makers and retail investors.
• Indirect advertising — The registration and registration process for most of the major exchanges provides a form of free advertising
• Brand equity — having a listing on a stock exchange also affords the company increased credibility with the public, having the company indirectly endorsed through having their stock traded on the exchange.
• Brand equity — Getting a listing on the stock exchange further improves the company’s reputation with the media, with the business implicitly getting the shares listed on the stock exchange.

Other factors for a company going to the marketplace

Offering securities to the market has other benefits for businesses, in addition to the popularity of making their equity publicly traded on the stock exchange. Before the Internet boom, several publicly traded companies had to have proven track records and a tradition of productivity.