Disadvantages of Issuing Stock to Public

• Unlike private companies, public companies

are required to file their financial
Additional statements with the Securities and
Exchange Commission (SEC) every year.
Regulatory Reporting a company’s financial position
publicly requires that company to establish

Requirements more stringent financial controls, staff a

financial reporting team and audit
committee, implement quarterly and yearly
And financial close processes, hire an audit firm,
and complete hundreds of other
Disclosures tasks. These responsibilities cost public
companies millions of dollars every year and
require thousands of labor hours. 
• The IPO process also imposes severe restrictions on the
company’s marketing and publicity activities during the “quiet
period” preceding the filing of a registration statement. 
• The changes to the securities laws resulting greatly increased
the compliance issues that a public company must meet (with
corresponding cost increases). 
• Going public places your company under the supervision of the
SEC or state regulatory agencies that regulate public
corporations, as well as the stock exchange that has agreed to
list the company's stock. This increase in regulatory oversight
significantly changes the way you can manage the business.
Market Pressures

Once a company is public, its every move is scrutinized by investors and analysts around the world
that can lead to Market pressures for company.

A public company’s stock price is frequently subject to rapid fluctuation.  The stock price can be
affected by a variety of factors, over which management may have little or no control.  A loss of
stock value can lead to dire consequences, such as stockholder lawsuits, loss of confidence in
management and possible hostile takeovers. 

Public companies also are faced with the added pressure of the market which may cause them to
focus more on short-term results rather than long term growth.
• An initial public offering may or may not be the right direction for your company. IPOs
come with a host of advantages and disadvantages. In order to become an IPO, a
company must be able to pay for the generation of financial reporting documents,
audit fees, investor relations departments, and accounting oversight committees. IPOs
often generate publicity by making their products known to a wider potential swath of
customers. But taking a company public is a huge risk. Smaller businesses may find it
difficult to afford the time and money it takes to become an IPO. Privately held
companies have more autonomy than public ones.