Taking the company public.

• Author: Kronemyer, Bob
• Position: Issuing public stock

Like visions of sugar plums dancing in the entrepreneur's head

For many entrepreneurs, it's the equivalent of visions of sugar plums dancing in children's heads on the night before Christmas: raising millions of dollars of capital by issuing public stock. But, rather than wait for Christmas, companies in reality must weigh several issues when determining the right time to go public, factors including the financial health and future expectations of an enterprise.

"A lot of companies would love to go public at any stage," notes John Reed, president of the Capital Markets Group for David A. Noyes & Co., an Indianapolis brokerage firm. "It's more what the market will accept."

During the past 18 months, Noyes & Co. has managed two Indiana initial public offerings, or IPOs: The Morgan Group Inc., an Elkhart-based transportation firm, and Personnel Management Inc. in Greenwood.

Before recommending an IPO, Reed likes clients to have annual sales of at least $20 million (or quickly approaching that number) and/or $1 million in net income. However, for a super management team with proven experience entering a fast-growth industry (such as biotechnology a few years ago), he might go along with an IPO even if the numbers come in lower.

Regardless, there are three elements of timing that have nothing to do with the health of the company wishing to go public. "One is overall economy," says Doug Conner, first vice president of corporate finance for McDonald & Co. Securities Inc. in Indianapolis. "For instance, in a rising-interest-rate environment, you find that it is not an attractive time for initial public offerings because institutional investors are worried that their funds are going to be siphoned into other financial instruments as interest rates rise."

A second timing factor is industry-specific. For example, during the past year, many stocks in the housing industry have seen decreases primarily because of higher interest rates.

The time of year the offering is issued also plays a role. "You find that, typically, December is a difficult time to do a road show because of the holidays," says Conner. "The last three weeks of the year are pretty dead." Summer also is a slow time because of vacation.

In February 1993, McDonald & Co. helped underwrite more than $30 million in an IPO for Shoe Carnival Inc., an Evansville-based discount shoe retailer, followed that November by another $50 million in a public secondary offering. McDonald also assisted...