At what point should a public company decide that they are better served by going private? There are many reasons why it may not be in the best interest of the company and its shareholders to stay public. The most obvious is that the business plan originally outlined by the company did not get executed, the stock price is depressed and the company no longer has the ability to raise additional capital. However, how about the company that has steady earnings but does not see the possibility of exponential growth? Is it really worth it for them to stay public?

With the implementation of Rule 404 of the Sarbanes Oxley (SOX) legislation going into effect early next year, now is the time for public companies to take a serious look at their options. The new rule mandates that companies implement stringent financial reporting checks and balances. The financial reporting has to be reviewed by a CPA firm and then audited by a different CPA firm. So, the bottom line is that public companies will have to dedicate an initial sum of money to implement the new financial reporting procedures plus substantially more money ongoing to pay their CPA firms for their 10QSB and 10KSB filings.

The average market cap of companies going public through a reverse merger is now over $50 million. The bar has been raised and investor’s expectations are greater today with OTC Bulletin Board companies than ever before. So, you have to ask yourself this question: Am I better off as a struggling public company or as a flourishing private company? If your growth options are limited and you have hit a brick wall when it comes to raising capital, by all means take the company private. If your company is making money but the carrying costs for the new SOX financial reporting requirements and CPA fees are starting to feel like you have a new set of silent partners then you may also be better served going private.

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