The IPO process unfolds in two distinct phases. The initial stage involves pre-marketing activities, where a company expresses its intention to go public. This can be done through soliciting private bids or making public statements to generate interest. The second phase is the actual IPO, orchestrated by chosen underwriters responsible for every facet of the offering, from due diligence and document preparation to filing, marketing, and issuance.
Key Steps in the IPO Process:
1. Proposals and Valuations:
Underwriters present comprehensive proposals, discussing their services, the optimal type of security to issue, offering price, share quantity, and the estimated time frame for the market offering.
2. Underwriter Selection:
The company selects its underwriters and formalizes the underwriting terms through a detailed agreement, often involving one or several underwriters collaborating on different aspects of the IPO.
3. IPO Team Formation:
Specialized IPO teams are assembled, comprising underwriters, legal experts, certified public accountants (CPAs), and Securities and Exchange Commission (SEC) specialists.
4. Documentation Compilation:
Extensive information about the company is compiled for the requisite IPO documentation. The S-1 Registration Statement, a primary filing document, includes both the prospectus and privately held filing information.
5. Continuous Updates:
The S-1 undergoes continuous revisions throughout the pre-IPO process, with preliminary details about the filing date and the prospectus being subject to ongoing adjustments.
6. Marketing Strategies:
Marketing materials are crafted for the pre-marketing phase, where underwriters and executives promote the new stock issuance. This period involves estimating demand, establishing a final offering price, and potential adjustments based on financial analysis.
7. Compliance and Board Formation:
Companies ensure compliance with exchange listing requirements and SEC regulations for public entities. A board of directors is formed, and processes for reporting auditable financial and accounting information quarterly are established.
8. Issuance of Shares:
On the IPO date, the company officially issues its shares. Capital from the primary issuance is received as cash and recorded as stockholders’ equity on the balance sheet, with subsequent share values dependent on comprehensive stockholders’ equity per share valuation.
9. Post-IPO Considerations:
Post-IPO provisions may be implemented, such as underwriters having a specified window to buy additional shares. Additionally, certain investors may be subject to quiet periods, contributing to the post-offering landscape.