Profit-sharing

If the firm is sitting on a highly successful venture, future success (and profit) has to be shared with outsiders. After the typical IPO, about 40% of the company remains with insiders, but this can vary from 1% to 88%, with 20% to 60% being comfortably normal.

Loss of Confidentiality

A major reason why firms resist going public is the loss of confidentiality in company operations and policies. For example, a company could be destroyed if the company were to disclose its technology or profitability to its competitors.

Reporting and Fiduciary Responsibilities

Public companies must continuously file reports with the SEC and the exchange they list on. They must comply with certain state securities laws ("blue sky"), NASD and exchange guidelines. This disclosure costs money and provides information to competitors.

Loss of Control

Outsiders are often in a position to take control of corporate management and might even fire the entrepreneur/company founder. While there are effective anti-takeover measures, investors are not willing to pay a high price for a company in which poor management could not be replaced.

IPO Expenses

An IPO is a costly undertaking. A typical firm may spend about 15-25% of the money raised on direct expenses. Even more resources are spent indirectly (management time, disruption of business).

Immediate Cash-out Usually Not Permitted

Typically, IPO entrepreneurs face various restrictions that do not permit them to cash out for many months after the IPO.

Liability

The company, its management, and other participants may be subject to liability for false or misleading statements and omissions in the registration documents or in the reports filed by the company after it becomes public. In addition management may be subject to law suits by the stockholders for breaches of fiduciary duty, self dealing and other claims, whether or not true.