What is an Initial Public Offering?

An Initial Public Offering (“IPO”) is a transaction whereby an investment banking firm raises investment capital and takes a private company public. Since investment bankers earn large fees based upon the amount of capital raised, they need to ensure there is significant public interest before they will represent a private company. Generally, large or well known companies are able to attract the attention and interest of the investment banker.

What are the advantages of an Initial Public Offering?

There are many advantages of an IPO, including but not limited to:

• Significant access to investment capital;
• Credibility as a result of the support and sponsorship of an investment banking firm;
• Professional advice throughout the transaction;
• Some stock price support after the private company is publicly listed;
• Analyst coverage and research reports to help keep the public informed.

What are the disadvantages of an Initial Public Offering?

There are several disadvantages of an IPO, including but not limited to:

• Extra dilution from investment banker pressure to price shares low so that more capital can be raised;
• Success is subject to the investment banker and market conditions;
• Costs much more than a direct public offering and often more than a reverse merger, excluding the cost of commissions;
• Significant requirements from management for meetings, conference calls and roadshows;

What are the costs of an Initial Public Offering?

A reverse merger has six major cost components:

• Accounting fees
• Legal fees
• Professional adviser fees
• Filing fees
• Financing fees

Accounting fees, legal fees, professional adviser and filing fees are largely dependent on the size and complexity of each transaction. Generally, IPO fees will cost several hundred thousand dollars to much more than a million dollars.

Financing fees are charged based on the amount of funding raised by the investment banking firm.

How can we help you with an Initial Public Offering?

As professional financing consultants experienced in initial public offerings, we assist private companies through the planning, implementation and management of attracting and working with investment bankers and their investors. We enable management to focus on building their business by reducing the amount of time they need to be directly involved in the process. And, by properly planning, implementing and managing the transaction, we are able to efficiently use resource and reduce accounting and legal fees.

For more information about our Initial Public Offering Services, please contact us now.