What does “going public” mean?

Going public is a process in which a business goes from minimal shareholders to a large base of shareholders by offering your securities for sale to retail investors or institutional investors via the stock market.

Can any company go public?

Yes! A company does not need to meet certain criteria but most private companies will meet the minimal regulatory requirements to go public on the many alternative stock exchanges available for new ventures, small and mid size companies. A reverse merger may also be a method for companies to go public that don’t meet the requirements.

Why would I want my company to become a public company?

Having a public company and being public has its advantages and disadvantages and is not for everyone. Some of the advantages include access to the public markets to raise funds, liquidity for you and your other shareholders, using your public stock to make acquisitions, providing an exit strategy to attract investors and for additional credibility in eyes of your customers and investors.

I’ve heard the term IPO. What exactly is an IPO?

An Initial Public Offering (IPO) is the first sale of a private company’s common shares to public investors for the purpose of raising capital for the corporation. An IPO is expensive and involves the services of an investment banking firm for underwriting, Big CA firm for audit financials and a lawyer to prepare a prospectus offering. While IPO’s are effective at raising capital, the vast majority of companies will not meet the asset, income, growth, revenue or capital requirement standards that of investment banking firms and regulators. IPO’s also impose heavy legal compliance and reporting requirements and are a costly undertaking. Many companies never complete the process.

What does it cost to do an IPO?

The average IPO costs US$1,000,000 plus companies usually have to give up 25% or more of their equity.

Do you have to do an IPO to go public?

No you don’t. There are also two other ways that most companies use. Direct Public Offering (DPO) – A DPO transaction is not only fast but it also allows the owners to retain the maximum percentage of ownership and there are no asset, income, growth, revenue or capital requirement requirements. In a DPO the company goes public first and raises fund through a private placement to retail or institutional investors.

The reverse merger - A "reverse merger" is a method by which a private company goes public by merging into a company that is already publicly traded. The cost of purchasing a public shell is from $150,000 and up. A private placement is then undertaken to raise funds for the company.

Do you need an underwriter to do a Direct Public Offering?

No, there is no underwriter involved in a Direct Public Offering, neither is a prospectus required.

If my company does not have the necessary qualifications to go public on one of the major exchanges what can I do?

You can take your company public on the Over-the-Counter Market (OTC).

Are there any ongoing reporting requirements once we’re public on the Pink Sheets, OTC:bb and Frankfurt Stock Exchanges?

You will be required to file a number of reports including unaudited annual financial statements and are required to provide investor relations services and agree to publicly disclose in a timely manner any material information that may have an impact on the price your company stock.