Taking Your Company Public

Raising money via the capital markets offersrewards as well as risks. Here's what to considerbefore making such a move.

the year, says going public in 1992 has opened up a number of financial options. “Having shares outstanding gives our company equity value and that comforts the financial markets,” says Cornwell, whose company owns and operates television stations around the country. “And if we were private we couldn’t access the debt market as easily as we do.”

Despite the obvious perks–the name recognition, the infusion of capital- -going public isn’t just about cashing in on the market and looking brilliant. Large institutional investors and shareholders on down to shy, retiring widowers all want earnings growth now, yesterday, and tomorrow. That also means a number of new “owners” will hold you to delivering good numbers as soon and as often as you can, a fact that’s bound to in some way compromise your long-term goals. And don’t expect all new shareholders to be passive investors. For one, even when management keeps a majority stake, the big financial institutions like mutual funds and pensions snatch up to 60% to 70% of the shares outside of management’s control, with another third going to high-net worth individuals, according to Utendahl’s LeCour. Neither group is likely to shrink if company results are less than cheery.

Then there’s the whole issue of financial records and statements filed at the SEC. You’ll now have a host of backseat drivers–reporters, union officials, competitors, neighbors and relatives alike–who can use government documentation as a window onto the inner workings of your company.

If that doesn’t fit the picture you’ve had in mind, remember there are other options should you decide the public route isn’t the most palatable, or if you want to nurse your company along a bit before taking the plunge.

Consider Dr. Mabel Phifer, not that she’s ever been one to sit on a good idea for too long. In 1981, she launched the International Telecommunications Consortium (ITC) and began broadcasting training seminars by satellite to colle
ge administrators. Sixteen years later, the suburban Washington D.C. company now telecasts college lectures from one campus to another nationwide and two years ago won a contract to beam the Million Man March around the globe. Phifer soon stands to make millions on a deal with the Pentagon, under which she’ll supervise a program that will help military personnel complete college degrees long distance via satellite television.

You might think Phifer could just sit back and entertain offers from investment banks far and wide. Wrong. Before tackling a full-fledged public offering, she’s looking at alternatives.

CHOICES, CHOICES
A full-blown public offering of stock isn’t the only choice Phifer or other CEOs have at their disposal. A private placement, for instance, would limit to 35 or under the number of shareholders Phifer would deal with and still bring her a handsome sum. Then, there are legions of venture capitalists out there looking for the next great story to ride to outsized profits. The problem is, often enough, there are compromises to pay. Sylvester remembers one instance where a venture capitalist brought millions in funding to a communications genius

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