Going public? 4 Alternatives to an IPO

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ALTERNATIVES TO AN IPO

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Is going publicright for your company?Maybe.Going public can be a defining moment for an organization, accelerating growth potential and strengthening reputation.


Is going publicright for your company?

✔ Compliance and reporting

✔ Investor pressure

But maybe not,because of increased…

✔ Legal risk

✔ Competition for talent


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Is going publicright for your company?

https://www.grantthornton.com/issues/library/articles/technology/2014/12-Is-going-public-right-for-your-company-ipo.aspx




There may be a

better way.


Alternatives to an IPO Exempt offerings

These offerings are exempt from SEC registration, and include smaller securities offerings under Regulation A and Regulation D, Rule 144A private placements, including both equity and debt offerings.

Advantages• Capital markets can be accessed without costs of SEC

registration and ongoing periodic filings.• The Jumpstart Our Business Startups (JOBS) Act has removed

some traditional roadblocks to executing exempt offerings.

Disadvantages• In most cases, a company can raise more capital through an

IPO than an exempt offering.• In many types of exempt offerings, securities may be sold only to

qualified buyers, limiting the pool of potential investors.


Alternatives to an IPO Crowdfunding

An emerging means of raising capital by obtaining a series of smaller investments from a large number of people, typically through the use of social media.

Advantages• Entrepreneurial companies can raise capital that traditional

investors or lenders are unwilling to provide.• Can be less costly.

Disadvantages• The JOBS Act established the regulatory foundation for

crowdfunding's equity model, but companies may not offer or sell securities until the SEC adopts final rules.

• Final SEC rules are likely to significantly limit capital that can be raised each year through crowdfunding.


Alternatives to an IPO Secondary market transactions

Private transactions that allow investors/employees to liquidate their stock holdings to qualified investors.

Advantages• Original shareholders or option holders can monetize some or all

of their holdings.

Disadvantages• This alternative is available only to certain well-known private

companies.• This is not a means to raise capital for the business itself.

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Alternatives to an IPO Debt financing

Involves borrowing money from a financial institution or via private financing.

Advantages• The equity owners' interests in the company are not diluted.• The after-tax cost of borrowing funds can be less than issuing

equity securities, mainly because interest expense is deductible.

Disadvantages• It imposes an obligation on a company to make periodic

payments of principal and interest.• It can constrain future growth if a company becomes "too

leveraged."

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Is going public right for your company?

Every business must reach its own conclusion, in consultation with financial, legal and accounting advisors.


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Going public? 4 Alternatives to an IPO

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