The initial public offering market has heated up; It is getting hotter and not just for large companies. In fact it is so hot that I am now recommending it to all my high-growth clients with sales from $5 million to $30 million, to raise substantial capital. If you believe you can’t go public because you won’t qualify, or can’t afford the cost … think again. .
Here is some information that just might change your mind about doing an IPO:
1. A lot of brokers are available to take you public. The Jumpstart Our Business Startups Act now allows companies to advertise for accredited investors. Broker-dealers are looking to take good, entrepreneurial companies public because they will be advertising to new investors, and brokers are always looking to increase their book of new clients/investors.
2. Many investors want to own your stock. Because of the success of the big IPOs, lots of small investorswho didn’t get the chance to buy into the big IPOs are looking to buy into small, high-growth public companies.
3. Pay no upfront costs to go public. The market is so hot that some IPO consulting firms will actually commit to pay all the upfront costs of an IPO, including the auditing costs. Included in that commitment is the promise from the broker-dealer group to raise a minimum amount of capital, which usually ranges from $5 million to $20 million.
4. A ton of capital is available once you are public. —On top of all this is the increasing number of private hedge funds that are coming into the small cap public market to continue to fund these new IPO companies once they become public.
Most of the old reasons to stay private have been eliminated. The IPO market should be as hot this year as in 2013, when U.S. IPOs raised $59.3 billion (40 percent more than in 2012), according to data from Thomson Reuters. All the ingredients are there for another strong IPO year:
• Investors have more discretionary capital.
• Investment bankers and broker-dealers are looking for companies to take public.
• The buying public is looking for more action in IPOs.
• The Great Recession created opportunities for new companies to create hockey stock sales growth, which make for great IPOs.
I know: There are higher compliance costs once you are a public company, and there is the transparency that comes along with it. But if you are in need of capital, going public in this market might not be a bad idea at all. Think about it.