To Be or Not To Be Public

By Lloyd E. Shefsky, Misty S. Gruber

The play's the thing to capture the conscience of the business owner who's weighing an IPO. A dramatization of the issues in two acts.

CAST OF CHARACTERS (in order of appearance)

Ed Eliot: CEO, director, and son of the founder of the E-Light Company, a St. Louis lamp manufacturer that has recently developed expertise in laser appliances.

Bob Jones: Ed Eliot's longtime golfing partner and CFO of a public company.

Ernest Platt: The estate planning expert at E-Light's accounting firm.

Catherine Akers: The partner in charge of the E-Light account at E-Light's accounting firm.

Mary Ketting: A professor of marketing at Washington University in St. Louis as well as marketing consultant to, and director of, E-Light.

Victor Castillo: The venture capitalist who funded E-Light's last growth phase when it bought out a competitor.

Sol Dowd: A retired entrepreneur who sold his business and now serves as one of Victor Castillo's two designees on E-Light's board.

Fred Ottinger: CFO of E-Light.

Charlie Olson: COO, president, and director of E-Light.

Seymour Posner: A senior partner of E-Light's law firm.

Wendell Parker: A businessman friend of Charlie Olson, CEO of another company that went public, and Victor Castillo's other designee on the board.

James Phillips: A junior partner of E-Light's law firm and a former staff attorney with the Securities and Exchange Commission.

Scene One: The “19th Hole,” the bar at a private golf club near St. Louis. It is late on a Saturday afternoon and Ed Eliot and his friend Bob Jones are relaxing after a round of golf.

Ed Eliot: Was that Frank Wellman I saw out there?

Bob Jones: I think so. Ever since he took his company public a few weeks ago, he's been strutting around like a tycoon.

Eliot: It certainly must have been the right decision for him. You know, I've been giving more and more thought to the possibility of doing the same thing, but I still have an awful lot of reservations.

Jones: Well, I've told you my feelings on the subject. I think it would be the right move now for you and for the company, especially with the performance you've had these last couple of years. Are your concerns still the same?

Eliot: Basically. I just hate the idea of losing control of E-Light. There's more than just money invested in a family business like ours. My father founded it just after I was born. I grew up knowing I would take it over and build on what he'd started. Now that I've brought it this far, I'm not sure I could just hand the reins over to a stranger.

Even if I kept some control, I know I'd still have qualms. Having to answer to outside board members is distasteful. And look at how independent boards have tightened the reins on their CEOs recently—they've even dumped some of them. What if they think I'm too old? After all, I'm almost 55. Even worse, I flat out hate the thought of exposing all our intimate financial details to the world—especially how much I make each year. Besides, how would our stock perform? We've grown so well over the years, but sometimes earnings slip for a while—like when we're developing new lines. You know what they say about the market being shortsighted—it likes strategies that keep those yields constant, whether or not the strategies are good in the long run. I don't know if I could keep the long-term growth going if I have to focus on how I do every single quarter.

Jones: I can't argue with that, but a strong underwriter can help. And going public doesn't have to be synonymous with losing control. Look at Frank. He was able to include some of his shares in his company's offering—to the tune of seven mill! The stock's doing great and he and his family still control the company. And what about the advantages? With funds from the public offering, you'd have enough cash to expand E-Light's operations considerably. You could implement some of the ideas you've only been able to think about up to now. Not only that, you just might have enough extra pocket money to buy that house in Palm Beach you've had your eye on. Give that some thought and see if it persuades you.

Scene Two: Eliot's office, 10 days later. A secretary has just ushered in Catherine Akers (E-Light's CPA) and Ernest Platt (an estate planning expert in Catherine Akers' firm) to meet with Ed Eliot. Once the introductions have been completed, Platt gets right to the point.

Ernest Platt: First of all, Mr. Eliot, I want to congratulate you on E-Light's success. I've reviewed the financial statements Catherine showed me and they are, indeed, impressive. However, the reason she consulted me is that there are some aspects of your financial position which she found troubling. She thought it would be wise for you to have some input from someone like me who has expertise in estate planning. There is a critical issue which you apparently haven't considered and does merit your immediate attention.

Eliot: Oh?

Platt: I don't mean to alarm you, but despite the degree of your success and the stability of your company, your family's future is far from secure. In fact, unless we do something—and please excuse my stating this so bluntly—it's likely that your family isn't going to have enough to pay estate taxes at the time of your death, let alone have any funds to live on.

Eliot: How can that be?

Platt: Let me explain. As you know, your gross revenues have risen steadily. Last year they were approximately $100 million, with an after-tax net profit of about $7 million. However, you've poured most of those earnings back into the company to support its growth. Therefore, your considerable worth isn't liquid since it's tied up in E-Light's assets and there's no market for your shares. The only way that value could be converted into cash would be to sell some of the assets, or perhaps E-Light altogether. With you gone, who's going to try to get top dollar for your family?

Catherine and I agree that your current life insurance policies would not cover your estate taxes and allow your family to continue its lifestyle. As you know, any policy that could do both would cost a small fortune. Besides, Vic Castillo [a major investor in the firm] is the prime beneficiary of your key-man policy. In the event of your death, your family could be forced into a fire sale of the company to get enough cash to pay estate taxes.

Eliot: Catherine, you've mentioned this to me before, but I hadn't really focused on the numbers.

Catherine Akers: Now Ed, this isn't all as bleak as it sounds. With a prosperous company like E-Light, you're in an ideal position to gain the liquidity your family—and you—may need. This seems like an ideal time to give serious thought to taking E-Light public, particularly since the market for IPOs is so strong now. With a market for the company's securities, you and your family could increase your liquidity substantially.

Eliot: I certainly will give serious thought to that possibility, and everything we've discussed here today.

Scene One: The boardroom of E-Light Company two months later. Present are E-Light's five board members: Ed Eliot; Charlie Olson (COO and president); Mary Ketting (marketing consultant); Sol Dowd (retired entrepreneur and one of Victor Castillo's two designees); and Wendell Parker (Castillo's other designee, whose own company went public). They are meeting with Fred Ottinger (CFO); Victor Castillo; Catherine Akers; Seymour Posner (senior partner of E-Light's law firm); and Jim Phillips (a junior partner of Posner's law firm and former attorney at the SEC).

Eliot: I think this might be the right time for us to consider—and I stress consider—taking E-Light public. I saw Frank Wellman recently and his company is going great guns, apparently in large part as a result of the considerable infusion of cash it got from its public offering. We can use cash to fuel our next growth phase. I think it's worth considering some of the pros and cons of going that route ourselves. I'd like to hear your opinions on this.

Eliot is thinking: I better not tell them about my estate planning problems right now, especially with Castillo here. Besides, it isn't and shouldn't be my only reason for considering an IPO right now. The economics for the company have to be right.

Mary Ketting: Well, I support it wholeheartedly. The publicity surrounding the listing of E-Light as a public company would make our label instantly recognizable nationwide. That kind of credibility can only enhance an already solid marketing program and increase E-Light's market share dramatically. Not only that, but with additional cash we could expand into markets across the country. I would love to target the West Coast, which has been ripe for our appliances for some time now. We could even shift some production to lower-cost markets, and increase our competitiveness in the U.S. considerably.

As Ketting has been speaking, Castillo has been thinking: All we need to scare the hell out of the employees is talk about moving. Of course, her enthusiasm might just work in my favor. An IPO would be just the ticket to get a great return on the $3 million I've invested in this company, and it would be a lot easier than finding a premium buyer in this economy. The stock market's doing great, but it's Ed's management that is selling the product and driving revenues. Ed won't stay without control, and no intelligent buyer will take it without him—at least for a while.

Victor Castillo: I agree, Mary, that market expansion could do great things, but you know as well as I that it takes a lot more than enthusiasm to make it happen.

Mind you, I'm not saying we shouldn't go the IPO route, since I know the stock market's stronger right now than it's been in a long time. If it's right, we don't want to miss the window of opportunity. I'm just injecting a note of caution here. I think we should think about the fact that there may be other, less risky or less costly, ways to raise cash—if that's the goal—as well as to expand nationally.

Ketting: Such as?

Castillo: Well, for instance, we could sell to a well-financed buyer.

Eliot: I, for one, don't favor that route. As I've said all along, I want to remain very active in E-Light's future. Besides, I want money for growth as well as cash for us. I might consider selling another block privately, as I did to you, Victor. But let me ask you, Sol. You sold your company and you seem to have done fine financially. If you had the chance to do it over again, would you make the same choice?

Sol Dowd: Well, Ed, there's no simple response to that question. Let me gather my thoughts for a moment.

As Dowd gathers his thoughts, Eliot is thinking: Even if he says it's the best decision he's ever made, I just don't want to sell. I'm too young to retire. I want to continue to be involved in my family business and maybe get my daughter more involved. Dad did say the company should always stay with the family. Besides, I want to be my own boss—for at least another 10 or 15 years. It's as simple as that.

I've got this company really on track now, and I want to be the one to guide it into the future. With these new laser products we've developed and with a new capital investor, I bet I can move revenues up to $300 million in five years.

Meanwhile, Dowd is thinking: It's funny Ed should ask that question, now that I see how everything has turned out. Sure, I did well financially when I sold my company. I wonder, though, whether I might not have done even better if I had gone public, generated additional capital to build the business up, and then cashed out. Of course, I don't regret that I avoided all the aggravation involved in going public.

Dowd: Well, Ed, I'm not certain I would go the same route again. As we all know, it's an extremely complex issue. That's what we need to focus on. It's critical that we carefully assess E-Light's suitability for an IPO and that we make sure we fully understand each of the decisions, obstacles, and requirements involved.

Castillo: Good point, Sol. Too many entrepreneurs consider a public offering a necessary rite of corporate passage, even though it may be a highly unsuitable move in their case. I would add, though, that with our sales and revenues increasing steadily over the past three years, this is certainly the time to at least consider an IPO.

Castillo is actually thinking: I guess I really would like to get them moving to a serious consideration of an IPO. I'd like to exercise my registration rights, but I may be forced to renegotiate them if the underwriter they select for E-Light's offering feels my piggyback shares will impair the offering. They'll certainly never let me piggyback all of them, so I'd better make sure I'm comfortable that Ed can keep the stock price up until I can get out in the market. Depending on how much I get diluted, I may be an affiliate. I think I can still sell, just in small amounts. Better make sure, though, so I know my options.

Eliot: I think that enhanced public stature could prove to be a strong catalyst for improving our already healthy sales and revenues and for advancing our laser product development and introduction. After all, a public company generally enjoys greater credibility in the eyes of the public. As a rule, people perceive it much more positively. The bank may even shave a half point off our line of credit.

Ketting: We could attract high-power sales people for our expansion, too.

Throughout the discussion, CFO Fred Ottinger has been growing increasingly nervous, thinking: I wonder if I have the expertise to handle all the financial details of a public company. I bet the first thing they'll want to do is hire a Big Six accounting firm, which will probably find fault with what I've been doing. Maybe I can dampen their enthusiasm. Better flatter Ed, though, since this is his idea.

Fred Ottinger: I hate to be the voice of doom here, but I want to make sure we don't let our initial euphoria distract us from the risks inherent in an IPO. Think about the enormous expenses we will have accumulated if it were to fail. Not only will there be tremendous initial costs, but there will be ongoing ones we've never had before.

We could easily spend a couple hundred thousand dollars before we even know whether the IPO is going to be successful. You heard about MicroTech. The day before they were to go public, the market dropped 200 points and that was it. Took them six more months and another $75,000 to actually go. If we do go to market and, heaven forbid, the stock doesn't do well, the negative publicity could be disastrous for our future sales efforts. Even if it does do well, we'd still have serious financial considerations, like the costs involved in adhering to all those SEC reports and requirements and in launching fancy PR projects.

And, Ed, you'll have to divert your attention to this IPO if it's going to work. Can we afford to lose you to that, even if it's just for a while?

Castillo: I think I can offer you some assurance there, Fred. We wouldn't—and couldn't—rush into an IPO. It has to make financial sense. None of us wants to lose money or to damage our growth potential. I think we all realize how many steps are involved in this process. A careful evaluation of our prospects is only the first one. The next one is a meticulous financial evaluation by an underwriter.

In fact, if you all approve, I suggest that we approach an underwriter soon to get his assessment of E-Light's chances for a successful public offering. He'll give us insight into precisely what the market wants now in a public company.

Ottinger: Isn't it still a bit early for that? Once we choose an underwriter, there'll be no keeping a lid on the news that Ed is considering taking E-Light public. Before we know it, privacy will be a thing of the past for everyone involved with this company.

I have serious reservations about having the intimate—secret, if you will—details of our operations, financial and otherwise, made public. Our customers, our suppliers, our competitors, the whole world will have access to information on our sales, costs, profits, and even salaries. That goldfish bowl aspect of going public really makes me uncomfortable.

Eliot is thinking: It certainly will take some getting used to. Do I really know what I'd be getting myself into? How will the $1 million annual salary I give myself look in the public's eyes? Will I have to cut my salary and change my living style? How would stockholders or analysts react to the fact that I employ Patricia, my own daughter, as vice-president for product design? Or that I own the building in which E-Light is housed and lease it to my own company? Or that I write off my car, my membership in the country club, and some other discreetely selected personal expenses?

Eliot: Believe me, Fred, I have many of the same concerns, but I think it would be negligent of us not to at least start discussions with an underwrite.

Charlie Olson: I agree. In addition to guiding us into the spotlight, an underwriter should be able to help us with some mezzanine financing in the interim. Also, if we need to massage anything to make an IPO feasible for E-Light, he'd be the one to tell us. We want to be careful about how we go about this. Neither Fred nor I want it all over town that we're searching for an underwriter.

Castillo: I think Fred and Charlie have made a good argument for not talking to more underwriters than is absolutely necessary while we're still unsure about whether we'll even choose to go public. Also, I don't want someone to think that we were turned down if we decide against an IPO. We'll need to be sure this stays confidential. It seems much wiser to approach one or two competent people than to “shop” a deal.

Eliot: It really is of utmost importance that we choose an underwriter whose ability to provide a thorough and impartial financial evaluation is beyond question. I want to be able to completely trust his assessment of whether or not E-Light could experience geometrical improvement if it were to move into the future as a public company. And I want to make sure that he's strong enough to support the stock price once we're out. Seymour, can you give us an overview of the criteria he'll use to reach his conclusions?

Seymour Posner: Actually, why don't we have Jim Phillips [former SEC lawyer] do that for us? He's the IPO expert in our firm.

Eliot turns to Phillips, thinking: So much for getting an overview. Jim has never used 20 words when there's a chance that 200 might make him look more important.

Jim Phillips: Thank you, Seymour. I do, of course, have considerable experience in this area and I'm more than happy to share it with you. As for your question, Ed, the underwriter will explore such factors as the price your earnings can support given industry norms—this is otherwise known as the price-to-earnings ratio. He'll also explore whether the company can effectively put the money to work, which is important, you know, since they're not going to do a public offering of less than $10 to $15 million; your historical earnings trend, based on your prior years' performance; present and projected market shares; and the quality of your management team.

Wendell Parker: You're fortunate, Ed, to have such direct access to an expert in securities law. When I took my company public, my general counsel made the mistake of failing to select and recommend securities counsel early enough. He was so reluctant to draw attention to his own inexperience in this area and so fearful of losing the company as a client that he waited for the underwriter to point out—indeed, insist on—the need for outside guidance before doing anything about it. That failure lost us a lot of time which proved nearly disastrous to the IPO.

Eliot: We are, indeed, fortunate to have selected a firm which had the foresight to include a partner with such extensive experience in securities law. However, that is certainly not the only area in which we will need ongoing advice if we do go public. We'll need you to continue to fill your unique role, Seymour, by counseling us in our overall business matters.

Ketting: Ed, to say that we only “may” need special counsel doesn't seem quite strong enough. For starters, we'll have to bring in a patent attorney. Let me emphasize again that if we take E-Light public, it will be the ideal time for us to expand into that laser product line we're developing, which we can then use to forge a path to new markets. That type of advanced technology will involve sophisticated R&D, which brings up patent issues. It will also require a trademark or trade name, which brings up others.

Phillips: Good point. Ideally, though, some of E-Light's designs and technology should already be patented. I'm sure the underwriter will have some concerns about the fact that they aren't. There's another problem, too. The disclosure of the fact that they aren't patented could serve as red flags to E-Light's competitors. We also need to make sure that our trade names are fully protected.

As Phillips is speaking, Posner is thinking: I have got to teach this guy the meaning of the word “downplay.” Who does he think will take the heat for the decision to forego patent and trademark protection? Me.

Posner: I'm sure that the absence of patent and trademark protection won't prove to be an insurmountable obstacle if we do take E-Light public, and I'm quite certain it won't be the first time the underwriter will have had to deal with it. Besides, very few of our competitors have been able to patent anything more than their designs. We've done that too. There's another issue I think we ought to give some attention to now, that of how early we should have E-Light audited.

Akers: When thinking about that question, you should consider the fact that if we do go ahead with an IPO, the SEC will require that at least two years' audited financial statements be included in the registration statement. There are some special schedules that must be prepared, as well as a pretty comprehensive discussion and analysis of E-Light's financial condition—not only now, but where we think we're going. The SEC standards are somewhat more restrictive than generally accepted accounting principles so, obviously, that will take some time.

Ottinger: Then the earlier we know what needs to be done to audit E-Light, the better. We should also be mindful of the fact that if we fail to comply with them early enough, we run the risk of making decisions we'd have to modify later.

Phillips: The importance of this audit can't be overstated. Up until now, E-Light has never been audited. The review it has undergone is far less extensive than an audit. Once we are public, we'll also need to comply with the SEC's annual report filing requirements. We're also talking about such things as quarterly information, details on investor relations, and data on trading prices and the like.

As Phillips begins to expand on the topic, Posner is thinking: I certainly hope he'll have the good sense not to suggest that we dump Catherine's firm. I'm the one who brought Catherine to Ed in the first place and if an IPO means the end of that relationship, I don't want her thinking I'm in any way responsible.

Phillips: Now, let me state right out that I think we would be plain foolish not to go with a Big Six accounting firm for this audit. First of all, the underwriter will prefer it. And second, a second-tier firm, even one as competent as Catherine's, just doesn't have the extensive SEC experience to perform the complex tasks involved.

Posner: I'd have to disagree with you, Jim. I don't think that our going with a Big Six firm is inevitable. When I recommended Catherine's firm to you, Ed, I did so because of its sterling reputation. I'm sure it could rise to any challenge an IPO would present.

Parker: Well, Seymour, I hate to say it, but I think Jim may be right about this.

Eliot: I'd like to state up front, Catherine, that if we were to decide to go with a national firm, it wouldn't in any way reflect a lack of confidence in your ability or in the competence of your firm. In any event, even if the underwriter does force us to change, that in no way means we won't be needing your expertise in dealing with other matters.

Akers: Well, thank you, Ed. I'll certainly continue to be committed to meeting E-Light's needs in every way that I can.

Meanwhile, she is thinking: I've got to keep the IPO. It's going to be a little tougher than I thought. I hadn't figured on the comfort the “Big Six” label might give these guys.

Olson: One thing I suggest we take care of as soon as possible is whipping into shape E-Light's business plans for how much we want and what we'll do with it. It'll be something the underwriter will look for.

Parker: You're right, it is important to get that taken care of, but from my experience, nothing is as critical as preparing to take the E-Light show on the road. Ed, you and other members of the management team will have to be ready to impress brokers and analysts. You'll want them walking away awed by your eloquence, impressed by your business talent, and inspired by the proficiency with which you brought E-Light to this point.

Meanwhile, Eliot, trying to look enthusiastic, is thinking: I know I'm going to hate this. I'll have to leave E-Light in Charlie's hands for six months and invest all that money in hiring backup staff to stand in for the people I take with me. It's like going into a second business. I wish I could send Charlie in my place, but there's no way he's sophisticated enough to project the image we need.

Phillips: Oh, don't look so worried, Ed. Seymour and I will prep you.

Posner: What Jim means to say, Ed, is that we have gained considerable experience in public speaking, which we will certainly share with you before you leave. However, we are more than confident that you'll have no trouble at all leaving your audiences with a favorable impression of both E-Light and yourself.

Eliot: Well, thank you, Seymour. I certainly appreciate the vote of confidence.

Parker: The “road show” isn't all there is to it, Ed. Someone has to draft the prospectus. You'll also need to give a lot of attention to your media contacts once you're public. Things like quarterly financial announcements, trade journal articles about E-Light's products, reports on its management. That sort of thing.

Phillips: Ideally, Ed, you should have cultivated these media contacts long before taking E-Light public. By the time of your IPO, you should already be a quotable resource within the industry. Prior publicity is critical because announcements, releases, and interviews are prohibited by securities laws before and during the registration and public offering periods. They are referred to as “gun-jumping.” Too many companies make the terrible mistake of waiting until just before an IPO, or even after, to establish a solid relationship with the media.

[A few moments of uncomfortable silence fills the meeting room, which Dowd finally breaks with an attempt at humor.]

Dowd: Well, Ed, I know that I, for one, never gave much thought to such things as media contacts when I was in the driver's seat of my company. That's one reason I now spend most of my time in the driver's seat of a golf cart. It's not too late for you to join me, you know.

Eliot: Believe me, that option is looking better and better all the time.

Ketting: Now, Ed, we'll just engage a crackerjack public relations firm. I know several. We'll have no trouble whipping our media relations into shape in plenty of time. And think of some of the positive aspects of going public.

Olson: For one thing, it will be easier to attract new top employees to E-Light once it's a public company.

Parker: That brings up another important issue, Ed. If you do go public, you'll have to think very differently about recruitment than you do now. At the moment you can afford to rely heavily on a few individuals, but as the head of a public company, your goal would have to be to recruit and retain a much larger number of solid managers.

As I'm sure Vic will tell you, public investors want management to be around for awhile—and there has to be depth. What was that recent IPO—the one they touted as the $100 million company with the $1 billion management? Anyway, you know what I mean.

Posner: If you go ahead with this, Ed, I suggest we evaluate a number of different incentive programs in terms of their potential legal and psychological impact before deciding on one. Stock options, for example, can be structured as a nice incentive. Catherine, you can probably give us some help here.

Parker: It's not too early for you to start scrutinizing some of the other details of the business as well. If I recall, we had to have all our corporate records reviewed, our operational procedures overseen, our management practices reevaluatedÖ

Phillips: That's just the overview, Wendell. If Ed goes ahead with the IPO, I will have to monitor all corporate minutes and every operational contract on an ongoing basis. I'll have to make sure every government report is filed on time and retained in an organized manner. I'm talking every one, from local and federal tax returns to state charter and franchise tax reports to ERISA reports and filings. Not only that, but...

As Phillips warms to his topic, Akers is thinking: And he's off!

Phillips: ...I'll have to review every employment agreement. I'll have to meet periodically with each of you. I'll not only have to attend every one of your board meetings from here on in, I'll also have to take an active role in guiding them. Not only that, but I'll also have to help guide the selection of directors. And, if independent directors do become involved in E-Light's affairs, our duties will expand even further. I'll have to be teacher, coach, and constructive critic. It will be vital for us to cultivate a positive relationship with these outside directors. Although they may be wary of us, I'll have to find a way to let them know that our primary objective is to protect not only E-Light, but them as well, from liability.

Eliot: Well, I think we've unearthed about as much information as any of us can absorb for the moment. I'd like some time to mull this over on my own before we move any closer to a decision.

Scene Two: The boardroom after the meeting has been adjourned. Ed Eliot is sitting alone, deep in thought. He gets up, walks stage left, and directly addresses the audience.

Eliot: To be public, or not to be, that is the question. I wonder what advice my father would give me if he were sitting in this room right now. I'm sure the worry I saw on some of those faces today wouldn't have escaped him. He always saw the E-Light team as somewhat of a family and I know for certain that going public is not the best thing for every member of that family. An IPO could jeopardize relationships I've spent years creating and even some that have existed since his time. I've got to talk to Posner about an employee stock plan or something to keep all my employees in. I'll need to have the people in the shops keep pushing. There should be some way they can cash in on this a little—not just management but the little guys, too. Even so, my father might very well feel that I were betraying the legacy he created by taking E-Light public.

On the other hand, he would never suggest that I play fast and loose with the future security of my family. His grandchildren meant everything to him and the thought of their having to struggle in the event of my death would have horrified him as much as it does me. He certainly wouldn't suggest that I run the risk of leaving my family without adequate funds to pay the estate taxes, let alone their living expenses. That thought is probably enough to make the price I'd have to pay for an IPO tolerable.

My family would pay a price for an IPO, too. Their privacy would diminish as sharply as mine would. I must say, though, that the burden might feel an awful lot lighter to my family as soon as they realize where we'd be able to vacation and the kinds of cars we'd be able to afford. Those positive lifestyle changes now would be a lot better than those negative lifestyle changes that my poor estate planning would bring them.

Of course, those perks wouldn't come without an enormous investment of time, energy, and money. The IPO itself would be as demanding as running two businesses simultaneously and, if E-Light became a public company, I'd be under constant pressure to sustain its momentum and fuel its expansion. I've always thought that at this point in my life I'd be tapering off my hours and workload, not adding to them. I don't know if I'm anxious to do that at all.

If I were to do it, though, I could really create an E-Light which exceeds my father's wildest dreams. With the opportunity to branch into new products and move into new markets, who knows? We could become a force on the international business scene. Not bad for a company created just one generation ago as a small, family owned business. That would certainly be an achievement.

Then again, I wouldn't be doing it myself. In fact, I'd have to learn pretty quickly to stop thinking in terms of “I” altogether. Those outside directors would have plenty to say and that loss of control could very well drive me crazy. True, I'd gain the wisdom and insight of new people, and I doubt that they'd ever throw me out—I think. But I'd also have to start thinking about such possibilities as potential shareholder suits and hostile takeovers. Those are no small worries.

Of course, the rewards aren't exactly small either. I couldn't very well say this at the meeting, but yes, I would enjoy the prestige that would come with being CEO of a public company.

I shouldn't overlook the fact, though, that with image comes responsibility. But it could be exciting, I suppose, to have the chance to forge new relationships with the public. I just can't be certain.

[Eliot sits for a few moments longer, then rises, turns off the light, and pauses in the doorway of the darkened room. Then, with a shake of his head, he exits.]


Lloyd E. Shefsky and Misty S. Gruber are partners in the Chicago law firm of Shefsky & Froelich Ltd., which specializes in corporate and securities matters, including IPOs. The play presented here is adapted from its longer, original version, “Prospectus Prospective: Private Deliberations about Going Public.”


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Autumn 1993

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