Term Going Public for Companies: Meaning, Advantages and Disadvantages

Bittime - Going public is the process in which a private company becomes a public company by offering its shares to the public through an IPO. Learn the benefits, challenges and differences with an IPO in this article.

What is Going Public?

Going public is a process in which a private company changes its status to a public company by selling its shares to the general public through an Initial Public Offering (IPO). 

This step allows the company to get fresh funds from investors and increase its credibility in the capital market. The process of going public includes various stages, including preparing financial reports, regulatory approval, and marketing shares to potential investors.

Why Do Companies Choose to Go Public?

Companies choose to go public for various reasons, primarily to gain access to greater funding to support business expansion, debt repayment, and product and service development. 

Apart from that, becoming a public company can also increase company valuation, attract more strategic partners, and provide incentives for employees in the form of shares. 

On the other hand, status as a public company brings additional responsibilities, such as compliance with capital market regulations and transparency of financial reports.

Benefits and Challenges of Going Public

Advantage:

• Greater Access to Funding – Companies can obtain capital from public investors for business expansion.
• Increase Credibility and Transparency – Status as a public company makes the company more trusted by investors and business partners.
• Liquidity Opportunities for Existing Shareholders – Existing shareholders, such as founders and early investors, can sell their shares on the secondary market.

Deficiencies:

• Significant Cost and Time – The process of going public requires large costs, including underwriting, auditing and legal compliance costs.
• Strict Supervision and Regulation – Companies must comply with strict regulations regarding financial reporting and corporate governance.

Difference between going public and IPO

Often, the terms going public and IPO are used interchangeably, but they are different. An IPO is the process in which a company first offers its shares to the public. 

Meanwhile, going public covers the entire process of a company's transition from private to public, which includes an IPO and other administrative and legal steps.

Read Also: What is an IPO?

Conclusion

Going public is an important strategy for companies that want to grow with the support of public funding. However, this decision must be considered carefully considering the challenges that come with it. 

By understanding the benefits and risks, companies can determine whether going public is the right move for the future of their business.

FAQ

What is going public in a corporate context?

Going public is the process in which a private company becomes a public company by selling its shares to the general public through an IPO.

Why do companies choose to go public?

Companies choose to go public to raise additional funds, increase valuations, and expand access to capital markets.

What is the difference between going public and IPO?

IPO is the process of offering shares for the first time, while going public includes the company's transition from private to public through an IPO.

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Reference:
Investopedia, Going Public, What it Means, Accessed March 10, 2025

Author: Irwan