How to Use the Power of a Public Company to Attract Investors and Raise More Money (7 Ways)

9/25/20233 min read

Before delving into the specifics of using a public company to raise capital, it's essential to have a basic understanding of the process of going public. Taking a company public involves conducting an initial public offering (IPO), where shares of the company are sold to institutional and retail investors. The IPO process typically requires thorough due diligence, legal compliance, and the assistance of investment banks and legal advisors.

7 ways to leverage the power of a public company to attract investors and raise more money

Leverage the Enhanced Visibility and Credibility
Capitalize on the Liquidity Advantage
Tap into the Wider Investor Base
Utilize Secondary Offerings
Capitalize on Mergers and Acquisitions
Get Ongoing Support with Healthy Investor Relationship
Build Trust with Corporate Governance and Transparency

1. Leverage the Enhanced Visibility and Credibility

One of the significant advantages of being a public company is the increased visibility and credibility it brings. Going public allows your company's name to be listed on stock exchanges, making it more accessible to potential investors. This increased visibility helps attract attention from analysts, media outlets, and the investment community as a whole. The enhanced credibility that comes with being public can instill confidence in potential investors and open doors to larger funding opportunities.

2. Capitalize on the Liquidity Advantage

Public companies benefit from greater liquidity in their shares, allowing investors to buy and sell them more easily. The presence of an active and liquid market enhances the appeal of investing in a public company as it provides investors with the ability to exit their positions quickly if desired. This liquidity advantage can be a significant draw for investors, especially those seeking flexibility and the ability to manage their investments actively.

3. Tap into the Wider Investor Base

As a public company, you gain access to a broader investor base, including institutional investors, mutual funds, pension funds, and retail investors. This larger pool of potential investors provides an opportunity to raise substantial capital. Additionally, public companies often experience increased trading liquidity, allowing shareholders to buy and sell shares more easily. This liquidity can attract new investors who are looking for investment opportunities with the potential for greater liquidity.

4. Utilize Secondary Offerings

Beyond the initial public offering, public companies can utilize secondary offerings to raise additional capital. Secondary offerings involve the sale of additional shares to the public after the IPO. This strategy can be employed to fund expansion plans, research and development efforts, acquisitions, or debt repayment. Secondary offerings offer a way to access capital without incurring additional debt and provide an opportunity for existing shareholders to sell their shares if desired.

5. Capitalize on Mergers and Acquisitions

Being a public company can significantly benefit your ability to pursue mergers and acquisitions (M&A). Public companies have the advantage of using their shares as currency for acquisitions, enabling them to negotiate deals based on stock swaps or a combination of cash and shares. This ability to use stock as currency expands the range of potential M&A targets and can be an effective strategy for strategic growth and consolidation.

6. Get Ongoing Support with Healthy Investor Relationship

Effectively communicating with investors is crucial for a public company. Establishing a dedicated investor relations function within your organization is essential to build and maintain relationships with the investment community. Regularly communicating your company's progress, financial results, and growth plans can help attract and retain investors. Developing a comprehensive investor relations and communications strategy is key to maximizing your company's ability to raise capital through ongoing support and engagement from the investment community.

7. Build Trust with Corporate Governance and Transparency

Investors value companies that prioritize corporate governance and transparency. As a public company, adopting strong governance practices and maintaining transparent financial reporting are critical. Demonstrating a commitment to ethics, accountability, and regulatory compliance sends a positive signal to investors. By providing timely and accurate information, conducting regular audits, and adhering to rigorous corporate governance standards, public companies can instill confidence in potential investors, leading to increased interest and investment opportunities.

Bottom Line

Ultimately, utilizing the power of a public company to raise capital is a dynamic and evolving process. It requires adaptability, agility, and a continuous focus on delivering value to your shareholders. By harnessing the advantages of being public, you can tap into the financial resources necessary to achieve your strategic goals and position your company for long-term success in today's competitive business landscape.

I hope you enjoy reading this blog post. If you want me to help you with your business funding, valuation or IPO, just book a call.