Access to capital and increased prestige are some of the motivating forces behind going public. Issuing stock has the advantage of raising capital without obligating the business to repay loans. The additional capital allows for continued growth, even when earnings and bank loans are insufficient to meet expansion objectives. Also, a successful public offering can improve net worth and debt-toequity ratio, thereby increasing credibility and financing leverage with lenders.
Public offerings also enhance a company’s prestige by increasing its visibility within the business community. The prestige of going public can be an effective device for attracting top-rate management executives. In turn, a strong management team is often the key to both increasing profitability and attracting new investors. In fact, during the growth of the high-tech industry bubble, stock options were essential for attracting and keeping employees. Public stock provides
its owners with the ability to sell more easily when an exit strategy is desired.
Public offerings also enhance a company’s prestige by increasing its visibility within the business community. The prestige of going public can be an effective device for attracting top-rate management executives. In turn, a strong management team is often the key to both increasing profitability and attracting new investors. In fact, during the growth of the high-tech industry bubble, stock options were essential for attracting and keeping employees. Public stock provides
its owners with the ability to sell more easily when an exit strategy is desired.
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