IPO Preparation Checklist
Many private companies consider an initial public offering (IPO) as a viable option for growing their business. This process is complicated, carries significant risks and requires strategic thinking and careful plan to ensure long-term success.
The first step in planning an IPO is to create and present your equity story, which communicates to investors your strategy for value creation and differentiates your company in the marketplace. This is crucial for establishing an attractive valuation and attracting the attention of analysts, investment bankers and underwriters.
The next step is to examine your leadership team and management. An IPO is a risky venture and you must be sure the management team you choose to work with can handle it. For example, an IPO could trigger additional financial reporting requirements and tax implications, which might require adding a tax or finance specialist to the executive team. You will also have to decide if you wish to have dual-class stock which grants the founders and higher-ranking managers different voting rights.
A solid record of financial accountability is essential for an IPO. This is why you need a well-defined SOX program, which must be implemented and revised prior to the IPO. It is also essential to review your current system of records including material agreements, capitalization files and historical options grants. This is essential to meet SEC requirements and bank underwriters. It is crucial to determine whether there are any “material weaknesses” in the company’s controls to ensure that you have the controls in place prior to going public.