What are the advantages of going public?

• Access to capital – capital can be raised from the capital market as debt or equity. The amount of capital raised varies based on the level of need of each company. The capital can be used for working capital, salaries, business expansion, etc.
  
  
• Higher valuation – public entities have higher valuation than their private counterparts. The value of a private company typically increases many folds once it’s public. The more attractive the business model, the more valuation it will capture.
  
  
• Publicity – news press releases can be an excellent marketing tool for the company’s products and services as the releases are often disseminated worldwide.
  
  
• Currency for compensation – stock can be used in lieu of cash as compensation thus allowing the company to conserve its cash reserves. Compensation in stock is also desirable since the rise in stock value is an added kicker.
  
  
• Merger and acquisition vehicle – using the valuation of your company stock as well as access to the capital market allows you to acquire other companies without significant cash outlay. Target companies often like to be acquired by public entities to get more for their values.
  
  
• Status symbol – public companies and their principals are often treated with more respect.
  
  
• Exit strategy – when a private company goes public, its valuation increases many folds equaling to many years of running the same business privately. Cashing out on the stock is a good way to reap the return on your investment in a much shorter time frame. This is a huge benefit for the principals and investors of your company.

What are the disadvantages of going public?

• Cost – there is an initial cost to become a public company and an on-going maintenance cost. The cost varies on the complexity of each company.
  
  
• Dilution – as you raise capital or issue shares for compensation or acquisitions, your ownership of the company will be diluted. However, it is often better to own a small portion of a large pie than large portion of a small pie. For most, remaining in control is more important than diminishing shares ownership. CDM can assist with the capital structure design so that the desired controlling parties will remain in control to make key strategic decisions.
  
  
• Lost of control – gradual loss of control is typical through dilution. However, through proper structuring and agreements, loss of control can be minimized or eliminated.
  
  
• Public disclosures – as part of a fully reporting company, all material business matters must be disclosed on a timely basis. This will take some getting used to but will become second nature after a few quarters.
  
  
• Liabilities – investors buy and sell your stock based on your disclosures. There is a certain level of liability if your company information is not properly disclosed. CDM can assist in addressing this area by working with your company to establish guidelines and processes as well as provide proper disclosure languages in the filings to avoid potential problems.

What are the methods of going public?

The most well-known means of going public is via an Initial Public Offering (IPO). For those companies that can benefit from being public but are not necessarily a good IPO candidate or don't want to incur the cost of an IPO, we offer two alternative solutions:

• Reverse Merger - This is a process where a private company is acquired by a public entity and the control and ownership of the public entity is assigned to the principals of the operating private company.
  
  Berkshire Hathaway, Turner Broadcasting System, Texas Instruments, Tandy Corporation, Blockbuster Entertainment, and New York Stock Exchange are a few examples of entities that went public via a reverse merger.
  
  
• Self Filing - This is a process where the company register itself with the Securities and Exchange Commission as a fully reporting public company. We prefer this cost effective method in going public because the end result is a clean public company with known shareholders and liabilities.

How can CDM Capital help?

We can help you go public by sourcing for a merger candidate or assist with the self filing process. We can also be retained to assist with all public entity related matters. We can even help you outsource all the public entity related functions such as investor relations, public relations, accounting, legal, SEC filings, etc. to allow you to focus on building your business as you would prior to becoming public.