As with any business decision, the decision to offer an Initial Public Offering is an important one that should be carefully considered. When done correctly, an IPO can boost to the company and propel it to even greater heights.
The benefits of an IPO are broad:
- Fresh liquidity
- Cash infusion
- Growth in trust for the company
The fresh liquidity and cash infusion go hand in hand. By offering shares of ownership in the company, investors come in to provide cash to help grow operations. In return, they receive a piece of the company and its future profits, and that activity can lead to greater trust from the public. Giving the public a stake in the company means that they also now have a vested interest in the growth of the operation. That is always a benefit.
There are two types of companies that are in the best position to consider an IPO in today’s market. These are companies that are either larger (approximately $500 million in sales per year) or are growing fast. Companies of these types are most likely to grab enough attention from early investors to make an IPO worthwhile.
Our advice is not to wait until filing an IPO to think about your Directors and Officers Liability program. Generally, a D&O liability contract provides security and certainty to directors and officers by providing certain coverages to protect their risks. It is important to know that purchasing some Directors and Officers coverage as a private firm can position you to build a solid D&O program as you transition from being a private company to becoming a public firm. The coverages under a D&O policy are not universal, but establishing a relationship with the insurance underwriters before an IPO can help you develop an innovative program with clearer policy wording and leverage to receive the most favorable premium.
If your firm is seeking more guidance on planning and preparing an IPO, please contact us today. A TechAssure Association member will begin working with you to transition your insurance and risk management program as you move to public company status.