APEX Case Study - Going Public
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Assignment:
As you review your calendar for the coming week, you are reminded that the due date for an assessment of the expansion project is fast-approaching. Mary sees you in your office and walks in to talk.
"I'm glad I caught you in your office," she says. "I've been thinking about the cost of issuing equity and debt because I know it will be burdensome for Apex," says Mary. "On the other hand, we know that if we are to grow as a company, we must comply with the requirements of the Securities and Exchange Commission (SEC) and issue equity as well as debt."
"It's a big decision," you agree. "Maybe it would help if I identified the costs of issuing equity, as well as any advantages and disadvantages of engaging in this process. I could also isolate two primary compliance requirements, specifically those indicated by the SEC for an initial public offering to which the firm must adhere, as well."
"You know, sometimes it's helpful to see things written down when making a big decision," she says. "Thanks."
For this discussion, identify the costs of issuing equity, as well as any advantages and disadvantages of engaging in this process. Also isolate 2 primary compliance requirements, specifically those indicated by the SEC for an initial public offering to which the firm must adhere.
I attached the scenario again and the balance sheet but I don't think you need those for this. I just attached just in case you needed to refer to them.
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Solution Summary
Rules for selling equity and going public in a case study about APEX corporation.
Solution Preview
Upon deciding to go public and making the decision to move forward with issuing / selling equity, our company is permanently forfeiting our right to a portion of all returns our products may generate in the future as we grow. In addition there can be substantial costs that are associated with raising equity capital in the public markets. The process of selling equity will entail hiring professional accountants, advisors, fees, and underwriting expenses. Also, trying to measure the costs of selling equity to prepare for presenting an IPO against what the potential future returns will bring is impossible, therefore, may take a long time to quantify if it was worth issuing your equity away (Winter, 2013).
Additionally, before issuing equity, the company must evaluate some risk factors and consider if the time is right. To adequately ...
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