Gene one Problem Statement

Introduction

Gene One has built an organization that has developed a gene technology that eradicates disease in tomatoes and potatoes. The gene technology has helped many farmers and aided in the success of Gene One achieving 400 million in eight years of business. The Chief Executive Officer (CEO), Don Ruiz and the Board of Directors (Board) believe that to continue to grow 40 percent in each of the consecutive years, the organization will need to do an initial public offering (IPO). Gene One has a goal of meeting the IPO deadline within 3 years of beginning the process.

The objective of this paper is to examine Gene Ones recent decision to become a public company. Taking an organization public is a new venture for the current team of employees and this paper will look at the opportunities and challenges that currently exist along with market research. Finally the challenges and opportunities will be compared with the end stated goals.

Challenges and Opportunities

According to Ernst and Young’s 19th Annual Global Biotechnology Report, nearly 30 years after the first biotechnology company opened its doors; the sector is reaching a new level of maturity and globalization. While all business shares the same desire to maximize profits regardless of being private or public, there is a different rule set for each course. Private companies can react more quickly to challenges and opportunities without going through the many layers of decision-making processes. With a public company, decisions are open to more scrutiny as investors demand accountability. A private firm is more inclined to take a long-term strategic view because the firm is not under quarter-to-quarter pressure from analysts and shareholders (Charles Jones).

After a series of corporate scandals spawned the Sarbanes-Oxley governance rules, one law firm estimated the cost of being public rose more than 90 % for a middle market company. From a mere $1.3 million for expenses such as directors insurance, accounting, legal fees, compliance personnel and public relations rose to almost $2.5 million, said the Foley & Lardner report (Lindeman, 2004).

In the eyes of Congress and the SEC, the new rules resulting from the Sarbanes-Oxley Act (SOA) were designed to restore investor confidence. Several regulations were designed to increase transparency of corporate information by providing a more accurate picture of a company’s value and to restore confidence in the accuracy of financial information reported to the SEC. But from an investor’s perspective, more information is not necessarily better information. “Transparent” means the information must be clear and understandable. But corporate investor relations officers (IRO) often struggle with legal counsel and accountants about how to present information that is truly transparent. (Thompson, Jr.)

Challenges and Opportunities at Different Levels in the Organization

The Chief Executive Officer (CEO) has a greater risk including penalties for managing a public company. The Sarbanes-Oxley 404 Internal Control Requirements and Expectations is an SEC requirement. The SOX 404 provisions require the company to design, maintain, and operate effective internal controls over financial reporting in order to ensure that publicly-reported financial statements are accurate and complete. The CEO and the Chief Financial Officer (CFO) must certify all financial statements filed with the SEC. The maximum penalty for Securities Exchange Act violations has increased to $5 million for individuals and $25 million for entities as well as imprisonment of up to 20 years.

Gartner Research went so far as to call the Act “the most sweeping legislation to affect publicly traded companies since the reforms during the Great Depression. Information technology departments (IT) have a required responsibility for SOX compliance. Enterprise IT departments