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Going Public While Many Entities Essay

To begin with, publicly owned entities according to Brigham and Ehrhardt (2010) are required to submit to SEC their annual as well as quarterly reports. As the authors' note, these reports could end up becoming a costly burden. You should therefore take into consideration reporting costs before taking Cleveland Cavaliers public. Yet another factor you should consider is the IPO cost. In the opinion of Weaver and Weston (2007), costs in this case could include accountant fees, legal fees, underwriter expenses, etc. Secondly, Weaver and Weston (2007) point out that once an entity is taken public, the original owners have to share ownership. This according to the authors occasions some considerable loss of control. Indeed, you need to be aware that on taking Cleveland Cavaliers public, only decisions supported by a majority of shareholders will sail through irrespective of whether you (as the founder) are in favor of such decisions or not.

Disclosure is yet another issue you will have to contend with on taking Cleveland Cavaliers public. According to Brigham and Ehrhardt (2010), once an entity is taken public, it becomes relatively easy for anyone to determine the net worth of owners. All an individual has to do to determine an insider's net worth is to multiply the price per share by the number of shares held. Therefore, should you have reservations regarding public disclosure of your net worth, this is a factor you should seriously consider.

Next, according to Wong (2010), once an entity goes public, it "must make a full disclosure concerning its profits and losses." This effectively means that in the case of Cleveland Cavaliers, the team's losses as well as profits will be subject to public scrutiny. Losses could be a source of negative publicity for the team.

The Stock Offering Process

The very first step of an IPO according to Allen (2008) is the selection of an investment banker or underwriter. An underwriter in the words of Allen (2008) "is the firm that sells the securities and guides the corporation through the IPO process." Several underwriters can handle the undertaking. On the selection...

According to Allen (2008), an underwriter could agree to offer the securities for sale on a best efforts basis or firm commitment. As Allen notes, best effort is taken to mean that the offering will not be strong while the latter is essentially a commitment by the said underwriter to purchase the issuer's securities (at a discount) after which the underwriter sells the securities at full price (Allen, 2008). The next step according to the author is the filing of a registration statement with the Securities and Exchange Commission. This statement details the company's and offering info. Next is what Allen (2008) calls publishing of the tombstone. This is essentially a prospectus prepared by the underwriter and containing all the information about the issuer. The price of the stock is decided soon after. Lastly, prior to the IPO, prospective investors are presented with the prospectus by the underwriter. This is what Allen (2008) refers to as "a road show."
Conclusion

Based on the discussion above, it is clear that the process of taking Cleveland Cavaliers public could end up being quite complex and expensive. However, the advantages of taking the team public in my view outweigh the challenges and downsides associated with such a move. This is more so the case given that the move will increase the liquidity of your holding in a team you have built over the years. The national exposure the team will get in this case could further enhance its image.

References

Allen, K.R. (2008). Launching New Ventures: An Entrepreneurial Approach (5th ed.). Boston, MA: Cengage Learning.

Brigham, E.F. & Ehrhardt, M.C. (2010). Financial Management Theory and Practice (13th ed.). Mason, OH: Cengage Learning.

Weaver, S.C. & Weston, J.F. (2007). Strategic Financial Management: Applications of Corporate Finance. Mason, OH: Thomson Higher Education.

Wong, G.M. (2010). Essentials of Sports Law (4th ed.). Santa Barbara, California: ABC-CLIO.

Sources used in this document:
References

Allen, K.R. (2008). Launching New Ventures: An Entrepreneurial Approach (5th ed.). Boston, MA: Cengage Learning.

Brigham, E.F. & Ehrhardt, M.C. (2010). Financial Management Theory and Practice (13th ed.). Mason, OH: Cengage Learning.

Weaver, S.C. & Weston, J.F. (2007). Strategic Financial Management: Applications of Corporate Finance. Mason, OH: Thomson Higher Education.

Wong, G.M. (2010). Essentials of Sports Law (4th ed.). Santa Barbara, California: ABC-CLIO.
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