Companies that list their securities on a public exchange receive any monies paid by investors for their shares. The money goes directly to the company. This means that the initial public offering (IPO) gives the company a chance to tap into a large well of investors willing to provide capital for future growth, debt repayment or working capital. Companies that sell common shares do not repay investors capital.
Many companies strive to go public. Going public has the benefit of boosting a company’s ability to expand without incurring any debt. Once the business is listed, more common shares may be issued by way of a secondary offering, thus resulting in more capital.
Publicly listed companies have many benefits, such as a diversity of equity base, the ability to access cheaper capital, a more polished public image that brings more exposure, an easier time with acquisitions, more financing opportunities and greater liquidity for equity holders.
Some of the cons involve high marketing, accounting and legal expenses, requirements for transparency with regard to business and financial information, the risk of not obtaining the required initial funding and the need to broadcast all company information that competitors, customers and suppliers may find useful.