Is going public right for your organization?

By Maggie Chen posted 09-16-2019 13:49

  

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The first half of 2019 has been a busy six months, with focus on completing several international projects involved in the USA, Canada and Taiwan. With our International Partners, Staffs and Contractors, we are able to successfully complete each project. The strategy is to provide high efficient business services and control the project budget perfectly. With our three divisions, one corporation, I am glad to help our clients find solutions, increase business growth and improve business performances.

I want to share two IPO projects that we are going in the first year of 2019 below (Non-disclosure agreement to clients: We can’t publicize their names):

Business Restructures and IPO Preparations:

  • Vegetable Distributor:

Mr. Chuo is a vegetable distributor in Los Angeles, California. He successfully runs a business for 20 years. Mr. Chuo has 20 acres land he wants to develop into multiple businesses. His goal is to IPO his company in 3 years.

 Multiple Business Developments:

From Mr. Chuo’s business requirements, we will restructure his business; analyze, create and manage the new business proposals for him; finance his business; recruitment management team; prepare IPO in 3 years.

Finally, he agrees to add three new businesses.

1. Importing Agricultural Machinery

2. Resort for Tourism

3. Real Estate Project (working with government to provide affordable housing for lower income people)

We restructure his business in one business group instead of separate into four. Then we hire the Managers to develop these three new businesses. Our major job is making sure these businesses are doing well. We have meeting with these Managers every day and measure the business performances. We send a performance report to Mr. Chuo daily. 

The 3 years business plan that I gave to the Mr. Chuo is the roadmap in his business. We expect going to IPO in 2022. 

FINANCE

Mr, Chuo has high credit scores with his 20 year business history and secures assets so the finance part is not difficult to manage. The important thing is finding the lowest interest for him. Our USA Partner specializes in corporate finance so after our negotiation we found the best interest for him. We also research related government grants and funds for supporting business growth. Mr. Chuo has a successful vegetable distributor business for 20 years so the U.S. Department of Agriculture’s (USDA) and Agricultural Marketing Service (AMS) are the places to connect.

In addition, these grants opportunities support a variety of agricultural activities.

Business Plan: The roadmap to success

The Business Plan is the key to finding the best finance deal or the investor to invest in your business. If you don’t know how to develop a successful business, nobody will finance or invest in your business. 

CTL Business Group specializes in professional business plan writing. We know what the investors, banks or private lenders want. We also have thousands of data on government grants and funds to help businesses find the right grants or funds to apply.

  • Mining Company:

Another project is from Mr. Du who is a co-founder in the mining company. The mining company have profit revenue of $20 million last year. His brother is a Funder and they are planning to IPO in 2020. The mining company headquarter is in New York.

Mr. Du is a luxury house builder for over 18 years. His brother started the mining company based in Los Angeles, California in 2013. After three years, his brother moved the main office to New York. They hired 100 laborers from China to dig beryllium, soda ash, sulfur and copper. They use non-fuel minerals to extract through surface mining methods. The mining methods go through a process involving three general stages. The first stage is extraction, which includes blasting and drilling to loosen and remove material from the mine. The second stage is materials handling, which involves transporting the ore and waste from the mine to the mill or disposal area. The third stage, beatification and processing, occurs at the processing plant.

The United States is the world's second leading producer of coal, accounting for nearly 17% of world production. About 1 billion tons of coal is produced annually in the United States. The United States is also the world's leading producer of beryllium, soda ash, and sulfur, and the third largest producer of gold and copper. In 2006, the U.S. mining industry processed 1,162.8 million tons of coal, 59.4 million tons of metals, and 3,128.9 million tons of industrial minerals

Mining Industry Analysis:

The United States is also the world's leading producer of beryllium, soda ash, and sulfur, and the third largest producer of gold and copper. In 2006, the U.S. mining industry processed 1,162.8 million tons of coal, 59.4 million tons of metals, and 3,128.9 million tons of industrial minerals.

The U.S. mining industry consists of the search for, extraction, beatification, and processing of naturally occurring solid minerals from the earth. These mined minerals include coal, metals such as iron, copper, or zinc, and industrial minerals such as potash, limestone, and other crushed rocks. Oil and natural gas extraction (NAICS code 211) is not included in this industry. Metals and other minerals are an essential source of raw materials for the U.S. building and chemical industries and are also a critical part of the production of everyday electronics and consumer products. For example, over 65 different minerals are required to produce a modern computer. Furthermore, coal accounts for nearly 50% of electric power generated in the United States. 

Markets

Minerals are essential to nearly every aspect of our lives and our economy. Key markets include utilities, the primary metals industry, non-metallic minerals industry (glass, cement, lime), and the construction industry.

What we do:

Identify: Do they qualify as an emerging growth company?

The principal goal of the JOBS Act was to encourage private companies to raise capital through an IPO of their common equity. The Act was initially contemplated in March 2011 when it was determined that a long-term decline in US IPOs could result in a loss of up to 22 million American jobs.

The two main objectives of the JOBS Act are:

1.    To create an “IPO on-ramp” which reduces the filing and disclosure burdens associated with undertaking an IPO.

2.    To provide companies easier and broader access to the capital markets.

The Act applies to EGCs for up to a maximum of five years. EGCs are broadly defined as companies that meet the following criteria:

                   < $1.07 billion in gross revenue (such amount is indexed for inflation every five years);

         < $1 billion in issues of non-convertible debt in a three-year period; and

                   Generally less than $700 million in worldwide public float (not a large accelerated filer).

As long as these criteria are met, companies are permitted to abide by less stringent financial reporting rules as compared to non-EGC filers. Both domestic issuers and FPIs can qualify to be EGCs

Is going public right for the organization?

 We analyse to Mr Du and his brother the advantage and disadvantage to being a public company below:

Advantages:

 The most important question business stakeholders should ask is, “Why go public?”

 Some possible reasons include the following:

1. To access public capital markets and raise money to expand operations;
2.
 To acquire other companies with publicly traded stock as the currency;
3.
 To attract and retain talented employees;
4. 
To diversify and reduce investor holdings;
5. To provide liquidity for shareholders; and;
6.
 To enhance a company’s reputation.
7.
 To use their stock as acquisition currency, thereby conserving cash.
8. 
To increase reputation and brand.
9. 
To increase proceeds on exit.

Disadvantages:

Going public to raise some money isn’t always going to be totally positive. There are many negatives to going public with your business

1. Loss Control
2. Loss of Privacy
3. 
Public Expenses

Explain the process and costs to being an IPO below:

  • The Securities and Exchange Commission (SEC) is the primary regulator for the US securities markets and, as discussed below, its staff will review a company’s registration statement in connection with such company’s IPO.
  • The SEC generally seeks to ensure that the company’s disclosures comply with SEC rules and that its financial statements comply with SEC requirements and generally accepted accounting principles (GAAP). Primary areas of disclosure within the registration statement for an IPO include:
  • audited financial statements and a discussion and analysis of the company’s results of operations and financial condition;
  • a description of the company’s business;
  • disclosure regarding the material risks relating to the company’s business and an investment in its stock; and
  • Information relating to the company’s directors and executive officers and significant stockholders.

The SEC review process in an IPO almost always results in revisions to the initial version of the registration statement submitted to the SEC. It is, however, important to note that the review process is not a guarantee that a company’s disclosure is complete or accurate and the SEC does not evaluate the merits of any IPO or determine whether an investment is appropriate for any investor. Rather, responsibility for compliance with applicable disclosure requirements lies with the company and others involved in the preparation of the company’s registration statement and prospectus.

In addition to the SEC review process, a company must apply to the US securities exchange (eg, the NYSE or the Nasdaq) on which it wishes to list its securities. In the listing process, the company will need to meet certain basic financial requirements that are set by the exchange where such company expects to list. For example, the NYSE and Nasdaq will require that an IPO company satisfy certain earnings, income or market-value tests. Unlike in many other jurisdictions, however, the securities exchange does not typically require substantive revisions to the company’s registration statement.

Finally, the underwriters must file specified information and documents with FINRA relating to the underwriting terms and arrangements, which FINRA must approve prior to the completion of any IPO.

Costs:

IPOs in the US are expensive. There are significant costs relating to the transaction itself, as well as incremental costs to operate as a public company going forward. Note that companies typically also incur incremental expenses on an ongoing basis to be a public company, including:

  • expanded accounting, investor relations and legal capabilities;
  • higher levels of professional fees for auditors;
  • outside counsel and other advisers;
  • annual stock exchange listing fees;
  • director fees; and
  • directors and officers insurance coverage.

We set up the timetable to reach the goals. The strategy is finding the professional experts who have sold records to help the company to go to IPO. Luckily, we found another USA partner to assist us to continue these two projects.

Preparing to become a public company

We are preparing the timetable to make sure Mr. Chou and Mr. Du, will have successful IPO for their companies. Our team understand careful planning is an important thing. Mr, Chou and Mr, Du must prepare its management team and business units to begin acting and functioning as a public company, both internally and externally. Focusing narrowly on accounting and financial reporting matters surrounding preparation of the offering document is the wrong approach—a cross-functional, holistic view to readiness is critical to preparing the organization to operate as a public company

In our experience, a successful IPO has three equally important elements:

1.    A thorough IPO readiness assessment, where big picture issues are identified early and realistic timetables are established based on the offers strategic objectives, the company’s specific business issues, the time needed to prepare registration information and the time required to prepare for operation as a public company.

2.    A working group focused on the immediate process of going public.

3.    A working group focused on the tasks needed to prepare the business for being public.

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About the Author

Maggie Chen, Certified Management Consultant; Certified Mergers & Acquisitions; Founder/CEO at CTL Business Group – Canada, USA & Taiwan

Email: info@ctlinternational.ca

Buying/Selling Business; Mergers & Acquisitions; Business Valuations; Business Consultations; Corporate Finance; Investment; Business Training

Telephone: 1-800-301-6817; 403-9982436; 626-8176526; 0972-263662;

CTL Business Group Canada, USA and Taiwan:

Canada: www.ctlinternational.ca

USA: www.ctlconsulting.com

Taiwan: www.ctlinternational.com.tw

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