Going public means that a private company becomes publicly-traded – börsennotiert – and owned – staatlich. This is also called a stock launch oder initial public offering (ipo) – der Börsengang. Shares – die Aktien – of a company are sold to institutional and individual investors. This is a way of companies to expand – expandieren – and raise capital – das Kapital, Geldmittel. Furthermore, it increases a company´s prestige – das Ansehen.
The first step is to contact an investment bank. And to make decisions on how many shares will be issued and on their price. The investment bank then becomes owner – Eigentümer – of the shares and assmues legal responsibility – rechtliche Verantwortung. This is also called underwriting. The underwriter will try and seel the shares to the public for more than what was padi to the original owners of the company.
The earliest form of a company issuing public shares was the publicani during the Roman Republic. These shares were sold to public investors and at a market in the Forum. The first modern IPO occured – sich zutragen – in 1602 by the Dutch East India Company. They became the first company in history to sell bonds – die Anleihen – and shares of stock to the general public.
How to go public?
But before a company can think about going public it needs to meet a few requirements – die Voraussetzungen. For one, the company needs to have predictable – vorhersehbar – and consistent revenue – der Umsatz. Furthermore, the company should have extra cash to fund – etw finanzieren – the process of going public as it is not cheap. However, the funds from going public should not be used to cover the costs – die Kosten decken. The company should also still have room to grow while being amongst the top players in their field. Potential investors will compare companies in that field to one another. Additionally, the company should have a strong management team. Beyond the financials one of the biggest factors for investors is the quality of leadership – die Führungskraft.
And last but not least, a company should have a long term business plan – der Wirtschaftsplan – for the next three to five years. This helps the market and potential investors to see that the company knows what they are doing and what they want to achieve.
For a company to go public is a big decision. And as with almost every issue there are advantages and disadvantages – Vor- und Nachteile – that need to be taken into consideration.
- strengthens capital base – die Kapitalgrundlage
- diversifies – etw aufteilen – ownership
- increases prestige
- makes acquisitions – die Übernahmen – easier
- increases costs
- forces disclosure – die Offenlegung – to the puclic
- imposes more restrictions – die Einschränkung – on management
- puts pressure on short term growth