Why stock would generate bigger return on bonds

Prestige benefit free marketing additional there may

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Unformatted text preview: ave to hold it for 12 months. Public is generally better for investor but there are other factors to keep in mind (compliance cost: to be public company and to do public offering, they both cost a lot of money for documentation etc. pay all those advisors to participate. Semi- fixed cost, so you want to justify raising so much money. How quickly do you need the money? Uncertainty. SEC has 30 days to review public statement; virtually everytime, the SEC comes back with comments: questions or comments that the SEC wants addressed. SEC job is not to determine whether deal is a good deal or not, it is to ensure adequate disclosure. Rounds of comments take 10 days to 2 weeks, but entire process can take up to 120 days (ends when SEC has no further comment) registration statement goes effective and you can sell stock. But markets can turn faster and make it unfavorable to raise money. If you favor money quickly, you would rather do PRIVATE placement (no time barrier) If IPO window is closed, you may not have option of public offer, so you sometimes see companies file registration statement but then hold them. Who are the target investors? How much do they value liquidity? Public offering for liquidity If investors are willing to wait, then you can do private deal. Are there non- financial benefits of having a public market? If you are a public company, all your financials are available os there is CONFIDENCE premium with public companies. prestige benefit, free marketing (additional) There may be things you don’t want to disclose Question 3: do you raise money from institutions or individuals (retail)? What stage is your company at? If you’re IBM, you’re not talking to venture capitalists Common path: Startup (initially from founders or friends and family) venture capitalists or angel capitalist (high network individuals who are not friends or family but are in the business of investing) (A round of investment, based on type of preferred stock issued) private investors public (people investing in IPOs, longer term investors, state mutual funds, etc.) and retail investors (individuals who invest in public companies) How much are you raising? Do you need a lot of money? Yes look at institution. If you are private c...
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