Choice between alternative routes to go public: backdoor listing versus IPO

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Conference Proceeding
2010 AFAANZ Conference Website Proceedings, 2010, NA pp. 1 - 38
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Going public is the dream of many private companies. It represents a major milestone in the development of a firm. The listing status brings a lot of advantages to a firm. Some of these advantages include (1) access to capital markets and lower cost of capital; (2) enhanced company reputation and profile; (3) providing liquidity for owners to cash out; and (4) use of stock to pay for acquisitions, among others. However, going public is also a costly process. The out-of-pocket costs for an IPO typically involve fees paid for investment banks, accountants, auditors, lawyers, other experts, underwriters and brokers. The IPO firm will also have to pay for the printing of a prospectus and listing fees and other compliance costs. Other hidden costs entail underpricing, more stringent disclosure and regulatory requirements and the time spent by senior management in preparing the company for public listing.
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