Is Your Company Ready To Go public? Here's a Checklist for IPO!

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

Achieving success in the realm of public companies requires meticulous preparation. It is imperative to plan meticulously, time your execution perfectly, and manage your resources effectively in order to launch a successful IPO. A well-planned approach reduces the likelihood of errors and mismanagement, leading to greater efficiency and cost savings, as the process of going public can be pretty expensive.

The preparation phase can often be lengthy, spanning anywhere from 12 to 24 months. Automating some of your legal operations is one effective way to increase your efficiency during this time. A company needs to identify and address any gaps before going public. This includes gathering necessary data, such as financial and marketing information, submitting vital documents to the Securities and Exchange Commission (SEC), and determining the pricing of each share. These crucial steps must be taken before a company can successfully open itself up 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.

FAQs

How does the IPO work?

The term initial public offering refers to the first time a private company sells its shares of stock to the public. This transition from a private to a public company is commonly called "becoming public."

What happens after a public offering?

After the initial public offering (IPO), investors can sell their securities to other investors on the secondary market or stock market. The securities sold in a secondary offering are held by investors and sold through a stock exchange.

What are the advantages of going public?

Going public with an IPO offers advantages like raising capital for operations and growth, higher share valuation, funding for M&A, debt reduction, increased corporate identity, visibility, and attracting and retaining employees through stock grants and options.