Initial Public Offerings And Public Listings

What Does It Take For My Company To Go Public?

To “go public,” a company needs to have a trading symbol for one or more classes of its stock and a third party (exchanges or broker networks) must publish or quote prices at which the stock can be purchased or sold. Stock trading symbols can be issued by stock exchanges and FINRA. To be eligible to receive a stock trading symbol, a company must have a minimum number of stockholders, a minimum number of outstanding shares of stock that are eligible to be traded, and in the case of stock exchanges and most broker networks, a minimum value. See for example “Requirements For Listing on the NASDAQ” below.

Should My Company Go Public?

The primary reason to go public is to increase the ability to finance a company because public companies generally provide more liquidity to investors and stockholders. The word “liquidity” in the investment context means the level of ease at which an investor can sell his investment to another party. Due to enhanced liquidity, public companies can usually access financing at better terms than private companies. The larger and more diverse the revenue and operations of a company, the more likely it is to be a successful public company. The inverse is also true. Companies with smaller and less diverse operations have more challenges as public companies because their values are often speculative and harder to assess. A company considering going public, must weigh it’s likely benefits because the regulatory burden and costs can be significant.

How Do I Get On The NASDAQ?

Only companies who meet certain qualifications can have their stock listed on the NASDAQ platform. These qualifications include hundreds of stockholders owning at least 100 shares, minimum revenues and/or assets, the ability to have a minimum stock price, and a business type that the NASDAQ views as qualitatively acceptable. If a company qualifies, it can apply to the NASDAQ.

Am I Qualified For An IPO?

“IPO” stands for “initial public offering”. An IPO is technically the first time a company offers its stock to the public, which can be done through an offering of stock registered with the SEC or exempt from registration under federal and state law. The technical bar to do an IPO is actually quite low. However, the term IPO typically means an IPO where brokers acting as “underwriters” raise money for the company by selling registered IPO stock to the public. For smaller company IPOs, the broker may only agree to make “best efforts” to sell the IPO. Some of these IPOs may raise only single digit millions of dollars. Larger, more traditional IPOs, typically involve many broker firms who make a “firm commitment” to sell a minimum number of IPO shares.  These larger IPOs commonly raise hundreds of millions or even billions of dollars. For instance, in some of the largest IPOs, Facebook raised over $16 billion and Alibaba raised nearly $22 billion.

What Does It Mean To Be Public?

Generally, to be public refers to a company’s stock being able to be bought and sold by members of the public who may have no relationship to the company or each other. A public company’s stock is represented by a trading symbol that usually consists of three to four letters. The trading symbols for public stocks, along with the prices at which the stock can be purchased or sold, are published by third parties which are generally regulated by governments. These third parties include stock exchanges, such as the New York Stock Exchange, and broker networks, such as the OTC Markets. In recent years, trading of stocks has become almost completely electronic.

For more information on Initial Public Offerings And Public Listings, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (801) 355-7878 today.