Most private companies have opted to change their ownership from private to public. Public-owned companies benefit most from the Stock market listing, which successfully helps them deleverage their financial crisis. However, this process seems less common in the case of professional sports teams. It’s proven that sports teams that go public and in-stock listed increased their average points per game in their domestic league. Initial Public Offering (IPO) funds may help teams gain capital for acquiring playing staff and expand into new areas of activity through acquisition. There will be a positive impact on a company going public.
Companies going public will be able to raise capital which they will use to fund their operations and expand the company. Public companies gain more from liquidity as their shares have high valuation prices compared to private companies. The increased capital gain will help a company reduce its corporate debt as there will be more improved cash flow. Companies will gain the attention of potential customers as a result of financial media coverage. Companies will attract and retain their employees as the majority will prefer working in large public companies. (Ghonyan, 2017). However, there is a negative impact of going public.
The Process is Expensive due to its time-consuming result of preparing reports for disclosure to the public. Also, it will require mobilizing and training staff to accomplish this work or hiring specialists to take the company through the process. Due to the complexity of public management companies, management control will be lost as both majority and minority shareholders have a say on how the companies will be managed. There will be increased regulatory government oversight bodies that change the way business can be managed and conducted. There will be enhanced reporting requirements as public corporations have to disclose their annual business operations to the public (Ghonyan, 2017). Every company considering going public through an IPO should spend sufficient time thinking about how the advantages and disadvantages of being a public company would affect their decision.
References
Ghonyan, L. (2017). Advantages and Disadvantages of Going Public and Becoming a Listed Company. SSRN Electronic Journal. Web.
Oh, C. (n.d.). Why Are Sports Team IPOs Uncommon? Part of the Accounting Commons, Business Administration, Management, and Operations Commons, Corporate Finance Commons, Finance and Financial Management Commons, and the Sports Management Commons. Web.