Extract

Going public is the dream of many owners of private companies and it constitutes a major event in the life cycle of the firm. Listing has its advantages, among them being(1) an enhanced company reputation and profile, (2) access to an organized share market when raising additional capital, (3) a lower cost of capital, (4) liquidity for owners who wish to cash out, and (5) the ability to use shares to pay for future acquisitions. However going public is also costly. The out-of-pocket costs of an initial public offering (hereafter IPO) typically involve fees paid to investment banks, accountants, auditors, lawyers, other experts (such as geologists in the case of a mining company), underwriters and brokers. The IPO firm must also pay for the prospectus, stock exchange listing fees and numerous compliance costs. Other costs are less obvious, such as initial underpricing, the time spent by senior management to prepare the company for public listing, and the ongoing costs of meeting more stringent disclosure and regulatory requirements.