Pros and Cons of #oil and #gas IPOs
A recent article I read by the Oil and Gas Financial Journal claimed many small and mid-size energy companies have tapped the public equity markets in recent years.
In 2007 $16.1 billion in worldwide public equity deals were floated by energy companies in offerings of $200 million or less; there were 219 equity offerings of this nature (Source – Bloomberg). Moreover, some small and mid-size US energy companies tap equity markets in countries such as Australia and Sweden.
While issuing public equity can “jumpstart” a company, it is usually not the sole financial solution.
So what are the top pros and cons of bringing your company to market?
Pros
- Projects can be “jumpstarted” early on
- Potential source of “exit” funding for management and investors
- Provides exposure to public capital markets
Cons
- Stringent and expensive reporting and administrative requirements
- Often funding is not adequate to accomplish growth goals
- Much of management’s time is devoted to dealing with investors
- The market value for public companies is often far less than net asset value
Full article can be found here
Do you agree with these comments?
If you found this interesting you might want to see how Trap Oil managed their IPO in 2011 (successfully listing on AIM and ensuring continued growth) here
