Initial public offer decision

Strategic Dimension

 

The company has to choose between remaining private and going public and becoming a listed company.

 

The company has the choice of remaining private if there are no compelling reasons to go public. If the business can be built on equity sourced from limited number of persons with private wealth and debt sourced from banks and public.

 

In a business sense, a publicly listed and traded company has better visibility and corporate image. Listed companies have better corporate governance standards and hence attract better valuations and human resources.

 

There is scope for raising large amounts of equity if the company performs up to expectations of the market and the company management has growth plans.

 

Some managements find it easier to persuade large number of small public shareholders to support their decisions in contrast to large strategic shareholders.

 

Sometimes, the company is compelled to go public to provide liquidity window to one of its large shareholders who wants to exit.


Why IPO?
Instanbul Stock Exchange
http://www.ise.org/initialpublicoffering/IPOs/IPO_StockMarket/IPODecision.aspx

Model of Optimal IPO decision making
http://finance.wharton.upenn.edu/~luket/taylor_pastor_veronesi_2008.pdf