Why we prefer to invest in public companies
As an investor, you gain these benefits of owning shares in a public company:
• Liquidity and ownership is transferable. This allows each
individual investor to plan their own “exit strategy” based upon their attitude
towards “risk” and “reward” and the investment returns they are looking for.
• Access to Capital. There are many funding sources available
to public companies, which are not available to private companies. There is also
the ability to do both private placements and registered public offerings.
Participants in the private placement can benefit from buying stock (usually at
a discount from the most recent publicly traded price), holding it for a period
of 6 months to a year and then having free-trading stock to sell in the open
market.
• Established value for stock by the market place. Over the
long term, with all factors being equal, a publicly traded company is assigned a
higher value than a private one. In many cases this differential can be 100%. In
other words, a company could be valued at $25 million as a private company or
$50 million plus as a publicly traded company.
• Use of common stock as equity or currency for acquisitions.
The publicly traded stock can also be used to structure the transaction by using
convertible securities, sometimes with the conversion rate set higher than the
currently traded price of the common stock. Once the acquisition is announced,
there may be an increase in the price of the stock to justify the higher
conversion price.
• Compensation. Stock can be used to compensate both management
and employees as a way to conserve cash. In a competitive market for top-caliber
management talent, having stock options on a publicly traded stock is more
valuable and desirable that having the same options in a privately traded
company.
• Valuation. Investors can determine the current market
valuation of their investment by either calling their broker or on the Internet.
• Audited Financial Statements, along with mandated disclosures
of major corporate developments, are requirements of most publicly traded
companies
• Regulated by S.E.C. This makes publicly traded companies
safer for investors because the President/CEO and the Chief Financial Officer
must attest to the accuracy of the financial statements.
• Prestige and Legitimacy are usually attached to companies
that are publicly owned.
Contact Us
If you are interested in this type of investment opportunity please contact us for more information.