Analysis Of Why Private Companies Go Public

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Foster, Tom. "Do You Really Want To Go Public?!." Inc 37.8 (2015): 94. MasterFILE Premier. Web. 28 Mar. 2016. Out of all the citations, this piece of research ultimately uncovered the facts of what happens when a company decides to go public. It seems as every institution in America has the dream of taking a company public, with the idea that it will immediately become more successful. The truth is that once a company’s shares are available to the public, all information regarding the firm also becomes public. "Here 's the issue about being a public company," Sharples says. "If you 're private, you just make a decision. You don 't have to tell anybody." But when you 're public, you do have to tell people” (Sharples). This can be a hard and…show more content…
Five executives of highly successful companies discuss why they have made the decision to stay privately owned. Dick Forsythe of Eggers Industries Inc. says, “We stay private to maintain control.” Once a company goes public, they have to report all inside information including quarterly earnings and business strategies. It is clear that a privately held company has less pressure to increase earnings each quarter, which leads to a less stressful working environment which proves to be more effective. A major reason to stay private is that those who have contributed to the company’s success have a great pride in ownership. This is popular in family owned businesses, people want the business to remain in the family for future generations. Once a firm goes public, they often have to follow strict guidelines regarding business operations that restrict creativity. Companies looking to breach out into new economic sectors are better off remaining privately owned because of the flexibility it offers. Ridge Braunschweig, executive VP and CFO of Orion Corporation states, “A good, solid, consistent rate of growth over time is more important than short-term quarterly earnings results.” For private companies it is proven that long term-grown is better than short term growth. A major downfall when a corporation goes public is that the company’s culture changes. Employees of…show more content…
If a firm is apart of an industry with low entry costs such as real estate, it is more likely to go public. “We [determined] that companies from industries with low barriers to entry are more likely to go public in order to adopt more aggressive product market strategies that will deter new entrants” (Jong 168). In these cases, the larger corporations often force the newly founded firms out of business or buy them out. Those in less competitive and emerging markets are also more likely to go public. In this case, everyone is trying to take the company public before everyone else figures out how to duplicate their product or service. This is basically a first come, first serve type of IPO. In the past, the firm that grows the fastest often ends up controlling the new economic sector. As this academic journal has revealed, there is specific types of situations that result in companies remaining successful after the initial public offering is

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