LANSING, Mich. (WLNS) – You’ve probably heard of a company “going public,” but how does a company actually do that? WLNS is here for you with local money expert Stephen Schiestel to explain.
“Historically the main option that [companies] have been using for hears has been the Initial Public Offering, the IPL,” said Schietel.
This process involves a company using the services of an investment bank to bring a group of potential buyers together, raise funds, and then enter the public market.
“Recently, a second form that’s been getting a little more traction is called a direct listing, where a direct listing says ‘a previously private company suddenly lists their shares and becomes public,” said Schiestel.
A direct listing is not a way to raise funds, but rather a quick and direct way to make a company’s shares public.
“The third approach would be this idea of a SPAC. So SPAC is an acronym for a special purpose acquisition company, or also known as a blank check Company,” said Schiestel.
A SPAC organizes itself, it does an IPL, the investors are told that if they invest money in the next two years, this private company will merge with another private company and that SPAC takes the private company’s place on the public market.
“Really what an investor in a SPAC is doing is really hoping that the sponsors of this organization can go out and find a private company, and then be able to pay an appropriate amount, value them appropriately,” said Schiestel.
The average investor should avoid the IPL market, said Schiestel.
“This is probably an area of the market that is best left to the ‘pros,’ the institutional investors,” he said.