Question

What are the advantages and disadvantages of “going public”? In regards to advanced entrepreneurship.

Answer 1

The main reason companies go public is when their equity capital needs increase to the point where the opportunity cost of remaining private and compensating investors for the lack of liquidity become too great relative to the lower cost of capital derived from liquid public markets. 4 Advantages: Financial benefit, increased public awareness, increase in the market share, serves as an exit strategy for the founders. Disadvantages: cost of financial reporting (disclosures) can be high, following regulation of SEC, market may pressure the company to focus on short term goals rather than long term, agency problems.