4-05-2015 Why do IPO’s matter in the Solar Industry?
In the solar industry, it’s become increasingly common to see the phrase IPO attached to many companies. Vivint, First Solar, and Sunpower have all gone through the IPO process and came out fighting, ready to take on the world. But what, exactly, is an IPO and why does it matter so much to these companies?
What is an IPO?
An initial public offering (IPO) is a company’s first sale of stock to the public. It enables the company to raise money by either issuing debt or equity. After an IPO, a company’s structure changes.
Once a company successfully arrives at its IPO, it switches from a privately held company to a publicly held company. A public company must have a board of directors, and it must report its financial standings every quarter. In the United States, public companies report to the Securities and Exchange Commission (SEC).
Why have an IPO?
The main goal of going public is to raise cash. If a company is successful in selling itself to the public and convincing people to buy its stock, the company can raise millions of dollars through its IPO. Additionally, public companies can generally get better rates when they issue debt because of the increased scrutiny they’re under.
One of the biggest advantages of an IPO is liquidity. The company has cash on hand to spend. It doesn’t have to worry about selling its assets like buildings or equipment.
Why does going public matter?
Many smaller companies go public when they want to expand their business and need the money to do so. Instead of going to a bank and taking out a loan (which would count against them as debt), companies opt to sell ownership in the company to the public. This way, the companies get the money they need to grow, and they don’t have to take on the debt of a loan.
What does the future hold for solar companies that go public?
The fact that several solar companies have successfully gone public is a good indication of the strength of the overall solar market. The solar companies that have done an IPO seem better for it. They’ve placed their stake in the ground and aren’t going to budge from their course of growth, much like the solar industry itself.