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CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership

A private corporation is considering an initial public offering. Which of the following is the most likely benefit it would gain from becoming public?

The most likely benefit of going public is access to a broader pool of capital. Public markets let the firm sell shares to many investors and raise further equity later. Compliance costs increase and founder control tends to be diluted, so those options are wrong.

  1. AAccess to a broader pool of capitalCorrect
  2. BReduced costs of regulatory compliance
  3. CGreater control by founders over strategic decisions

Explanation

Listing lets a firm raise equity from a large investor base and makes later issuance easier. Compliance costs rise after listing, and founders usually see their control diluted by dispersed shareholders.

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