The world of IPO is diligent, and in current times, it is triggered by global politics and the interest rate environment, which offers profitable opportunities for a limited period. In addition, going public provides access to liquid and more significant sources of capital, but at the same time, it has to undergo greater public scrutiny and regulation. Therefore, if you are looking forward to opening paths to capital, leveraging the right insights to make the right moves at the correct times is imperative.
When a firm chooses to go public, common stocks of the privately owned company are opened for sale to the general public. These common stocks, also known as securities, provide liquidity to investors and employees. It also creates valuable currency in the market and offers incentives to others. A company filing for an IPO possibly chooses this route to:
Access public capital markets and raise money to branch out
To diversify and downsize investor holdings
To expand brand awareness
For employee retention and to attract better talent
To enhance existing shareholders' liquidity
To acquire other companies with stocks as currency
How to Prepare to Become a Public Company
The secret sauce to becoming a successful public company is careful preparation. Proper planning, right time execution, and efficient management are the keys to successfully going public. Better preparation means fewer errors and mismanagement, resulting in efficiency and saving funds, as an IPO is a costly affair.
The preparation phase can be lengthy, ranging from 12 to 24 months, and automating some of your legal operations is one such task you can opt for to increase your efficiency. During this period, a company must assess the gaps and close them before going public. Gathering necessary data, from finances to marketing, submitting vital documents to Securities and Exchange Commission (SEC), and deciding upon the pricing of each share; are all essential steps one must take care of before opening their company to the public.
Preparing a checklist to see if your company meets the requirements for stock exchange listing is as necessary as filing other documents. Talking to an expert will help you gain a better understanding of the going public process.
Beginning with the Process
Hiring a team of legal experts will make the IPO-filing process easy for you. They will guide you with preparing a registration statement for the SEC as the very first step. It has two parts: the prospectus and additional information. You can check for more information on the registration statement Form S-1.
The prospectus is a formal document required by the SEC that has all the necessary details about your company. It helps investors make informed decisions based on the information that you provide. It must have the following details:
Summary of the company’s background and financial information
Name of the company issuing the stock
Number of shares and type of securities being offered
Whether an offering is public or private
Names of the company’s principals
Names of the banks or financial companies performing the underwriting
The second part of the process needs you to mainly disclose your financial information. Issuance and distribution of securities, the indemnification of directors and officers acting for the company, any sales of unregistered securities within the last three years, representations made by the company acknowledging that it will keep the registration statement and prospectus current, various exhibits and financial statement schedules are a part of this disclosure.
What Happens After You Go Public
The process doesn’t end at only opening to the public. There are a number of forms that a company has to undertake in accordance with the SEC. Form 10-K, 10-Q, 8-K are some of them while a company has to comply with a host of reporting and other requirements. Taking care of the compliances within the time limit helps a company nurture a healthy financial relationship with the investors.
Managing so many legal operations, filing forms, maintaining records, board meetings, compliances and what not. Going public is a taxing and time consuming process which can be efficiently managed with the help of a legal operations software. Time management and cost effective measures are the secrets to launching a successful IPO in the US.
Book a free demo to understand how Traact can streamline your legal ops.