Question

The cost of meeting SEC and possibly additional state reporting requirements regarding disclosure of financial information, the danger of losing control, and the possibility of an inactive market and an attendant low stock price are potential disadvantages of going public. True or false?

Answer 1

Answer:

True.

Explanation:

Danger of losing control, and the possibility of an inactive market and an attendant low stock price are potential disadvantages of going public.

Companies that seeks to sell its stock on different stock markets or other major public exchanges must meet and maintain numerous listing requirements. Failure to comply with these mandates on an ongoing basis could cause the stock to become delisted from the exchange. The chief purpose of these requirements is to increase market transparency in an effort to foster investor confidence.

Answer 2

Answer:

True.

Explanation:

In business, going public is a term that is used to describe the process in which a private company offers an initial public offering (IPO), by doing this, the company becomes a publicly-traded and owned entity. Going public is a good way for businesses to raise capital for expansion.

Going public has its disadvantages however, and they are as follows:

• It is an expensive process.
• Loss of management control.
• Additional reporting requirements.
• Increased liability is possible.
• Possibility of an inactive market.