At FutureTech Capital we work as a consulting firm
to help your business identify particular benefits that would help
your business to grow and expand through becoming a public company.
Our capabilities, resources and relationships in
the financial communities allow us to provide a full range of services.
We have extensive relationships to ensure that the process is as
painless and quick as possible for your business.
We recognize the power of a public company in utilizing
opportunities not available to private companies. If you are considering
going public, contact us to learn more about the possible individual
advantages FutureTech Capital can bring your business.
What methods are out there to go public?
There are several methods out there, but basically
in order for your company to be public, you must have what it called
public stock. This is stock that is readily available to be sold on
a variety of different stock exchanges, including NASDAQ, NASDAQ Small
Cap, NYSE, OTC, and Pink Sheets. Each one of these different exchanges
have different requirements for your company to be able to trade your
stock, and different methodologies for you to get there. The list
of requirements and obstacles in your path to become a public company
are substantial. An average business owner is normally unable to pull
off such a feat without significant costs in terms of time and money.
The most significant cost is time lost by having your management team
focus on the requirements and steps of going public. This is especially
detrimental after your business starts trading, as most potential
investors will scrutinize your company's past performance, and any
decline or even plateau is often viewed very negatively. The best
method for most business owners is to find a company, like FutureTech,
in which they can "partner" with to ensure that their company
is able to go public. Usually this "partnership" will require
stock to be given to the company along with some money to cover the
costs of filings and other regulatory compliance issues. The good
thing about giving up some of your company's ownership, instead of
all cash, is an indication of the "partner" company's willingness,
and even vested interest, to ensure that your company's offering is
ultimately a success. FutureTech follows a similar methodology, and
through this vested interest, insures that your company is successful,
and that FutureTech will be your business partner for a long time
in the future.
What are some of the advantages of becoming a public company?
Simply put, the most apparent advantage of becoming
a public company is the access to capital through either an IPO,
or a series of other investment offerings in which your company
would sell some of its common stock to potential investors. This
is not the only advantage of becoming a public company, there are
many other distinct benefits that can help you grow, sell, or simply
provide more security in your business.
· Mergers and Acquisition: Because a public company actually
has a “real” and assigned currency value to its stock,
companies that are publicly traded have the ability to purchase
competitors, merge with other companies, and provide “liquid”
capital for these business deals. Additionally, in the merger arena,
if your business is public, its stock value will normally be much
higher than it was previously, and will enable many businesses to
increase their leverage within merger discussions.
· Higher Valuations: Public Companies are typically valued
more than private companies. For example, private companies (when
being sold) will have a normal valuation of 1 – 2 times their
annual revenue. Public companies will have valuations that can be
from 2 – 10 times their annual revenue (or more), depending
on the industry and the company.
· Benchmark Trading Price: The trading price of a public
company's securities serves as a benchmark for the offer price of
a subsequent public or private securities offering.
· Capital Formation: Raising capital later is usually easier
because of the added liquidity for the investors.
· Incentives: By enabling your current and future employees
to have a fixed-asset value on stock, options can become a powerful
tool in employee recruitment and retention.
· Reduced Risk: Public companies can have greater access
to additional capital (through secondary funding rounds), will provide
a “golden parachute” for founders and other stockholders
within the company, and will often enable the company, at a time
of sale, or merger, to be able to gain significantly more revenue
if the business is sold or merged.
· Reduced Business Requirements: While an underwritten initial
public offering requires a relatively long ands table earnings history,
the lack of an earnings history does not keep a privately held company
from becoming a public company.
· Reduced Dilution: There is less dilution of ownership control
compared to a traditional Initial public offering.
· Liquidity: More liquidity for founders, minority shareholders,
and investors.
· Prestige: Added prestige and visibility with customers,
suppliers, employees and the financial community.
FutureTech’s consulting service package:
FutureTech has developed a comprehensive consulting and services
package that will allow companies to realize and realistically estimate
appropriate benefits for their filing to become a publicly traded
entity. By enabling your company to realize why it is important,
and more importantly, what benefits you will be able to have as
a public entity, you will be able to make a complete and informed
decision about moving forward with an offering.
Ultimately, why Go Public?
There are many benefits to being a public company. We outlined them
earlier, here is a more thorough description:
1. Access to capital
Becoming a publicly traded company can give you the ability to have
access to more investors, which, through your public status, may
increase the odds of their investing in your company. When your
stock receives a public price, this sets a future benchmark price
that will enable future transactions to process at that amount.
Additionally, any potential investor, from literally anywhere in
the world, can contact a broker to purchase the stock at the public
price.
The money that is raised can be used for almost anything your company
needs for growth, paying off debt, marketing, acquisition capital,
and more. Additionally, when your company is trading in a public
market, you will have the ability to raise additional money by allowing
more of your stock to be sold in the marketplace. This gives your
company the ability to have readily-available access to additional
funds.
2. Liquidity
By going public, a company can create a market for its stock. This
gives the company a greater opportunity to sell shares of stock
to investors. In general, stock in a public company is much more
liquid than stock in a private enterprise. Liquidity is created
for the investors, institutions, founders, and owners. Investors
in the company may be able to buy or sell the stock more readily.
Often times institutional investors and venture capitalist will
require a company to become public prior to committing funds.
3. Mergers and Acquisitions
Once a company is public and the market for its stock is established,
the stock can be considered as valuable as cash when acquiring other
businesses.
A public company usually increases a company's valuation leading
to a variety of opportunities for mergers and acquisitions. A public
company also has the advantage of using the market's valuation when
exchanging stock in an acquisition.
Securities and Exchange Commission disclosure requirements offer
the public more confidence because in annual reports the company
outlines its financial condition and corporate strategy which encourages
corporate growth, development and merger activity. In addition to
acquiring companies many other assets can be purchased with stock.
4. Increased Valuation
The market value of a public company is normally substantially higher
than a private company with the same structure in the same industry.
Converting a private company to a public company results in a substantial
increase in value to owners. Statistics published by the United
States Chamber of Commerce show that sellers of private companies
receive an average of 4 to 6 times their net earnings. By comparison,
public companies sell at an average of 25 times their net earnings.
High tech companies are valued even higher.
Investors in a private company will discount the value of its equity
securities by reason of their "non-liquidity" - the lack
of a ready, public market for them. Thus, public companies often
are valued so much greater than private, similar companies in the
same industry. The availability of other alternatives to raising
capital permits a public company greater leverage in its negotiations
with both institutional and individual investors. Many institutional
and individual investors prefer investing in public companies since
they have a built-in "exit," that is, they can sell their
stock in the public market. Many companies that were private and
about to be purchased went public to be purchased at a much higher
price.
5. Compensation
Many companies use stock and stock option plans as an incentive
to attract and retain talented employees. It is increasingly common
to recruit and compensate executives with a combination of salary
and stock. This reward could be deemed even more desirable when
the company is publicly traded. Stock can be instrumental in attracting
and keeping key personnel. Also, certain tax advantages are a consideration
when issuing stock to an employee. Being public can help to create
a market for the company's stock. This market can result in liquidity
and reward for the company's employees.
A stock plan for employees demonstrates corporate goodwill and allows
employees to become partial owners in the company where they work.
An allocation of ownership or division of equity can lead to increased
productivity, morale and loyalty. This type of compensation is a
way of connecting an employee’s financial future to the company's
success.
6. Prestige
A public offering of stock can help a company gain prestige by creating
a perception of stability. The status of being a public company
can have a dramatic effect on a company's profile, perceived competitiveness
and stability. This perception can lead to expanded business relationships
and added confidence in the consumer.
A company's founders, co-founders and managers gain prestige from
being associated with a public company. Prestige can be very helpful
in recruiting key employees, marketing products and services to
your target market. When sharing ownership with the public, you
enhance the company's reputation and increase its business opportunities.
Your company can gain additional exposure and become better known.
Often a company's suppliers and consumers become shareholders as
well as joint venture partners, which may encourage continued or
increased business. Once public, lenders and suppliers may perceive
the company as a safer credit risk; this will enhance the opportunities
for favorable financing terms. Indeed, the suppliers' and customers'
perception of company success is often a self-fulfilling prophecy.
Many people have called it the ultimate status symbol.
7. Personal Wealth
One of the most important benefits of a public offering is the fact
that the company's stock eventually becomes liquid, offering rewards
and financial freedom for the founders and employees.
A public market for stock provides a potential exit strategy and
liquidity to the investors. A psychological sense of financial success
can be an added benefit of going public. A public company can enhance
the personal net worth of a company's shareholders. Even if a public
company's shareholders do not realize immediate profits, publicly
traded stock can be used as collateral to secure loans. Many feel
it makes sense at an appropriate time for investors and entrepreneurs
to cash out some of their equity in order to diversify their holdings
or to enjoy life. Employees and officers have two ways to add to
their wealth: by receiving a salary and selling stock or trading
the stock for another type of asset.
9. Publicity
Public companies are more likely to receive the attention of major
newspapers, magazines and periodicals than a private enterprise.
The proper use of press releases, interviews or news stories can
increase investor awareness, shareholder value and demand for the
stock. A strong ad campaign coupled with media initiatives can potentially
increase sales and revenue.
The publicity received from being public can encourage investments
from the public, new business development and strategic alliances.
Analyst reports and daily stock market tables contribute to further
awareness by consumers and the financial community. By virtue of
being a public company your company's story can more easily get
out to the world. This allows for investors who would not invest
in private companies but will invest in public companies to find
out about your company.
The publicity that a public company may receive can attract the
attention of potential partners or merger candidates. Because the
financial condition of a public company is subject to the scrutiny
of the Securities and Exchange Commission reporting requirements,
existing or future business relationships are strengthened. Many
private firms do not appear on the radar screen of potential acquirers.
Being public makes it easier for other companies to notice and evaluate
your company for potential synergies.
