Page 143 - Initial Public Offering - An Introduction to IPO on Wall Street

Considering the situation businesses face during a global pandemic, it is reasonable to assume
that financial forecasts have been lowered. As a consequence, firms need to consider what this
entails within the corresponding comp categories for target multiples and valuations.

This can affect valuations and push them below a favorable level from a healthfulness and
dilution point of view for current investors. On the other hand, when contemplating public
markets, businesses tend to avoid a scenario in which they have minimal investor interest due
to technical and valuation considerations, such as float and regular liquidity.

Managing Public Investors vs. Private Board of Directors

The board of directors of a private corporation is likely to comprise of the founders and
members of the biggest investors in the firm. Although the number of board members is
typically less than ten, each board member's viewpoints can differ considerably based on their
motives.

For instance, if Venture Firm Company XYZ was an early investor and is searching for a
liquidity case, a public offering or takeover would most likely be lobbied for by them. On the
other hand, if Venture Company ABC has invested recently, they would probably prefer
waiting for a greater valuation with less dilution.

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