Access to Capital: The cash raised from an IPO is significant in amount; the funds so raised can then be plowed into furthering the business growth, expansion, or acquisitions.
Liquidity for Shareholders: Initial founders and early investors can exit the business at or post-IPO, with handsome returns. These include:
Enhanced Profile Publicly traded firms raise the company's profile and credibility, hopefully leading to better business opportunities.
Challenges
High Costs: Legal, regulatory, and underwriting fees amount to millions. Compliance costs post-IPO are also continuous.
Market Pressures After the IPO, companies face quarterly earnings pressure, forcing short-term thinking and reducing management's flexibility.
Loss of Control: Public companies are beholden to the will of shareholders, and activist shareholders can often coerce determinations to be made.
Volatility: The ups and downs of the market determine stock prices, causing instability that can place pressure on the newer issuers.