Page 147 - Initial Public Offering - An Introduction to IPO on Wall Street

When you conduct an IPO, the market dynamics will have an impact on what valuation level
will initially be assumed, and then your success as a public corporation will help determine
your valuation over the longer run.

7.3.5 Sign 5: Compelling Case for Going Public
Gaining access to capital markets and setting up a currency for raising additional capital,
performing M&A, and rewarding workers with equity-based incentive rewards is the obvious
explanation for going public.

Furthermore, the money raised by an IPO can be a vital source of funding for R&D, new
technologies, capital investment, acquisitions, and continuing operations. An IPO is seen as a
significant step in the evolution of a business, and being publicly traded is also seen as a clear
indication that your organization will follow strict compliance and governance requirements.

And of course, providing the early investors with liquidity and the ability to realize a return on
the risk they took to invest in developing and improving the business is another reason to take
the company public.

7.3.6 Sign 6: Having a Clear, Strategic Roadmap
The blueprint for the investment story of your business is your strategic roadmap. It
persuasively describes the business while also presenting a straightforward strategy and
operational plan to expand the company and provide the returns on investment that potential
investors expect from a public corporation operating in your industry. In short, your strategic
roadmap will guide the investment case and express the vision of the leadership for the future
when you go public.

The process before your IPO is lengthy, but early and comprehensive planning can make a
massive difference. When you’re ready to take your business public, in addition to the timing
of the IPO, the stock exchange where you get listed will play a vital role in the success of your
IPO and have an impact on the longer-term market value of your business. The securities
exchanges for IPOs as well as the other actors involved in an IPO are discussed in detail next.

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