Staying Private versus Going Public

When a private firm becomes publicly traded, the primary benefit is increased access to financial markets and to capital for projects. This access to new capital is a significant gain for high growth businesses, with large and lucrative investment opportunities. A secondary benefit is that the owners of the private firm are able to cash in on their success by attaching a market value to their holdings. These benefits have to be weighed against the potential costs of being publicly traded. The most significant of these costs is the loss of control that may ensue from being a publicly traded firm. As firms get larger and the owners are tempted to sell some of their holdings over time, the owner's share of the outstanding shares will generally decline. If the stockholders in the firm come to believe that the owner's association with the firm is hurting rather than helping it, they may decide to put pressure for the owner's removal. Other costs associated with being a publicly traded firm are the information disclosure requirements and the legal requirements9. A private firm experiencing challenging market conditions (declining sales, higher costs) may be able to hide its problems from competitors, whereas a publicly traded firm has no choice but to reveal the information. Yet another cost is that the firm has to spend a significant portion of its time on investor relations, a process in which equity research analysts following the firm are cultivated10 and provided with information about the firm's prospects.

Overall, the net tradeoff to going public will generally be positive for firms with large growth opportunities and funding needs. It will be smaller for firms that have smaller growth opportunities, substantial internal cash flows, and owners who value the complete control they have over the firm.

Retirement Planning For The Golden Years

Retirement Planning For The Golden Years

If mutual funds seem boring to you, there are other higher risk investment opportunities in the form of stocks. I seriously recommend studying the market carefully and completely before making the leap into stock trading but this can be quite the short-term quick profit rush that you are looking for if you am willing to risk your retirement investment for the sake of increasing your net worth. If you do choose to invest in the stock market please take the time to learn the proper procedures, the risks, and the process before diving in. If you have a financial planner and you definitely should then he or she may prove to be an exceptional resource when it comes to the practice of 'playing' the stock market.

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