The Pros and Cons for the Company to Go Public

Topics: Security, Initial public offering, Stock market Pages: 2 (559 words) Published: March 28, 2013

Small companies looking to further the growth of their company often use an IPO as a way to generate the capital needed to expand. Although further expansion is a benefit to the company, there are both pros and cons that arise when a company goes public. As such there is a need to evaluate the factors Starhill REIT took into consideration before issuing their IPO. The factors, that is, the advantages and disadvantages are listed and described below: PROS

Less Need to Borrow
According to investopedia, Public companies, those whose shares are available for purchase on stock exchanges, can fund major initiatives such as expanding into new markets and entering new product lines by issuing common stock. Capital can also be used to fund research and development, fund capital expenditure or even used to pay off existing debt. So IPO is a way for Starhill to obtain money that they do not have to repay. Anonymous investors who purchase the stock are not considered as lenders; they are much rather considered as the companies co-investors. Stock as Currency and Public Awareness Tool

The “International Journal of Business” states that when public companies expand by issuing IPO they can use their stock in the future to acquire other businesses, they can use their own stock as part of the purchase price. This method ties the owners of the acquired entities to the buyer, in this case Starhill, and brings them on board in a meaningful way. Similarly, they can use their own stock as collateral for secured loans. Another pro is an increased public awareness of the company because IPOs often generate publicity by making their products known to a new group of potential investors, be it individuals or institutional investors the company places itself at an advantage. Stock Options

After companies have undergone their initial public offering, they can use stock options in various ways: as employee stock options, which are issued...
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