Initial Public Offering (IPO) is the most recognized means of going public. It is a process where the company sells its stock to the public for the first time and has them listed on an exchange for trading. The transaction is handled by investment banks who act as underwriters. They raise the money from among their clients in exchange for compensation. For their interests, most investment banks will only take on IPOs for companies they expect to grow significantly after the transaction.

Investment bankers whose job is to find investors for the new stock have very stringent criteria for the companies they represent. Many companies could benefit from being public but are not suitable IPO candidates. Development stage companies, companies that wish to go public in a weak IPO market or companies that are in an unattractive industry may find it difficult to find an underwriter for their IPO or one that will handle the transaction for a reasonable fee.

Fortunately, there are other methods of going public. Each method has its pros and cons and must be carefully considered against the company’s business objectives. Among the alternative methods, two most popular methods are reverse merger and self-filings.

Reverse merger is a transaction where an inactive public entity acquires an operating private company and all of management and controls are assigned to the operating company. As a result, the operating company becomes public immediately. Financing can be arranged as part of the transaction or subsequently. Turner Broadcasting System, Tandy Corporation, Texas Instruments, Berkshire Hathaway, Blockbuster Entertainment, and New York Stock Exchange are a few examples of companies that went public via reverse mergers.

Self-filing is a process where a company becomes public by registering itself with the US Securities and Exchange Commission (SEC) and follows all filing requirements. Once public, the company can offer its stock to raise money.