Sheehan & Associates, P.L.C.

A corporation's initial public offering of stock

For any business in Michigan, the Initial Public Offering of stock is a coveted rite of passage for any corporation that has proven itself to be viable and profitable. The increase in liquidity, the possibility of listing on a stock exchange, the additional sources of capital that comes with the sale of the stock and the improvement in profile are all desirable accoutrements to any successful enterprise. However, the process of creating and managing an IPO may be arduous, and the costs and fees associated with it can be expensive.

After the Sarbanes-Oxley Act passed in 2002, the process of offering stock became much more complex. The amount of regulatory oversight may be daunting to some companies, and the reporting requirements may raise the price tag of the IPO substantially. There are fees associated with printing, filing and listing the IPO, as well as payments due for all the required legal and accounting work. The underwriter of the IPO will get a 7 percent commission of the proceeds and an underwriter discount. Authorities on the issue estimate that most IPOs will cost somewhere around $2 million.

It is difficult to put a price tag on the prestige that comes with an IPO, but the new opportunities in listing the business are clear. Any business that made more than $10 million in the last three years, including $2 million in each of the last two years, may be eligible for a NYSE listing. NASDAQ requires $11 million over the same period for listing on their exchange. However, both markets operate secondary markets with much less stringent requirements.

Carrying out an IPO from start to finish is a specialized business task, and it may be helpful to consult with an attorney before starting. They may be able to offer useful advice and prevent legal errors.

Source: Inc, "How to Prepare a Company for an Initial Public Offering", Elizabeth Wasserman, December 04, 2014

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Sheehan & Associates, P.L.C.
1460 Walton Blvd , Suite 102
Rochester Hills, MI 48309

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