For over 35 years, Louis Paolino has served as an executive and board member in various public and private companies. In this capacity, Louis Paolino knows the advantages of private companies going public.
There are many advantages of going public besides the injection of fresh capital through an initial public offering. One of them is liquidity. When a company’s shares are traded on the stock exchange, they become more liquid. This means shareholders such as early investors and founders can sell their stock easily, realizing a return on their investment. Alternatively, these shareholders can use their stock, now freely marketable securities, as collateral to acquire financing from lenders.
The benefits of liquidity go beyond executive shareholders. Management and employees can receive compensation through incentives like stock options, allowing them to own marketable securities. Because the price of shares listed on the stock exchange is determined by the market every day, people who possess stock options are able to calculate their value whenever they wish. The company expands its payment options while employees diversify their wealth portfolios. In addition, employees become more invested in the company and its operations, since their wealth is directly tied to the company’s fortunes.
