By Jorge Olson. 06/21/2023
Published by Home Business
Most entrepreneurs and business founders aspire to see their company listed on the stock exchange one day, a move that promises increased access to capital for future growth, opportunities to expand through acquisitions, and the potential to alleviate debt burdens.
While many believe that the sole route to achieving this is through an Initial Public Offering (IPO), alternative pathways exist. Departing from the traditional IPO route may seem unconventional, yet it can align better with certain founders’ visions and their companies’ objectives.
Though IPOs remain the preferred choice for most companies, they are not the sole option. Consider these alternative methods to take your company public:
- Reverse Mergers: By acquiring control of a public company, reverse mergers offer a rapid route to going public. Unlike the lengthy process of a standard IPO, a reverse merger can transition a company into public status in as little as 30 days. This approach suits companies not urgently in need of capital infusion, making it ideal for those projecting strong performance post-public debut, typically generating over $20 million in revenue annually.
- Direct Listings: Direct listings enable companies to offer existing stock to the public, without creating new stock offerings typical in an IPO. Unlike IPOs, direct listings lack underwriters and “lock-up” periods, allowing shareholders to sell their shares immediately after the public debut. This cost-effective alternative also spares companies from hefty financial advisory fees.
- Dutch Auctions: Named after the flower markets in the Netherlands, Dutch auctions involve setting a minimum price for specific items up for sale. Bidders state the quantity they wish to purchase and their proposed price. The winning bid, known as the “clearing price,” determines the price for all winning bidders. Notably, this method, famously used by Google in 2004, empowers investors to dictate the stock’s value, bypassing traditional investment bankers’ involvement.
Considering the Pros and Cons:
While each method has its merits, careful consideration of the associated advantages and disadvantages is crucial. For instance, while reverse mergers offer a swift route to public status, instances of misuse have led to increased scrutiny, necessitating stringent listing requirements.
Similarly, while direct listings boast affordability and immediate shareholder liquidity, garnering attention from investors can be challenging, necessitating robust marketing efforts. Conversely, Dutch auctions eliminate concerns of undervaluation by investment banks but may face resistance from traditional Wall Street circles.
Ultimately, the chosen path to public listing should align with the company’s objectives, market position, valuation, and growth trajectory. Companies need not limit themselves to the IPO route; instead, they should weigh the available options to determine the best fit for their unique circumstances and aspirations.
Jorge Olson is the co-founder and CMO of two publicly traded companies, Hempacco, ticker symbol HPCO, and Green Globe International, ticker GGII. Olson was born in Tijuana, Mexico, without running water or electricity, hurdling buckets of water across a block several times per day. Now, Olson is the author of business and inspirational books, as well as an authority on consumer packaged goods, beverages, and wholesale distribution. His partners are super-entrepreneur Sandro Piancone, Cheech and Chong, James Linsey, Rick Ross and Snoop Dogg.
This article was published by Home Business
