Going public may be the ticket for some company executives in the plastics processing industry, but for others it can turn into a nightmare. As the industry matures, more privately held firms desire to take the big leap into the public realm. Money is the main reason.
Many processors throughout the 1970s and 1980s grew - one press at a time - until they reached $10 million in annual sales. They operated their businesses the way many entrepreneurs did: by the seat of their pants. They were successful almost despite themselves.
But making that leap to $20 million in sales and meeting greater demands to provide more services and better quality requires capital - more than most processors can get on their own.
While an initial public offering may bring in needed capital, is it always the best move for these entrepreneurs? I don't think so.
First, they must give up control of their business. They discover they now have a fiduciary duty to give stockholders a good return on their investment. They also must answer to a board of directors.
Sometimes this shared control works, but for many it doesn't. Some end up with angry stockholders and board members who quit in disgust. What seemed like a stepping stone to growing business when the money rolled in after the IPO, becomes the entrepreneur's biggest problem.
The former Cimco Inc. is a good example. Russell T. Gilbert is a hands-on, entrepreneurial type. Going public in 1986 seemed like a good idea at the time, but from what I know about him and his penchant for entrepreneurialism, it probably wasn't a good idea, given how things turned out. (Gilbert is embroiled in a lawsuit over his failed attempt to buy back Cimco's injection molding operations.)
One consultant who works with company owners as they decide whether to go public said that many of them aren't ready to relinquish the reins, and shouldn't do so, despite a desire to become a big company.
``If it's control they need, going public isn't the answer,'' he said.
An IPO must be done for the right reasons. If it is just to get cash to solve a short-term need for more equipment or a bigger building, other alternatives need to be explored. One company owner said he went public, only to sell his shares of the business then turn around and buy it back as a private entity a year later.
``Being a public company with all the hassles stockholders give you wasn't for me,'' he said.
It probably isn't for a lot of people. Plastics entrepreneurs need to think long and hard before they succumb to IPO fever.
Goldsberry is a Plastics News correspondent based in Phoenix.