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2012 IPO Considerations

2012 IPO Considerations

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Published by Startup Tool Kit
2012 IPO Considerations
2012 IPO Considerations

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Categories:Types, Business/Law
Published by: Startup Tool Kit on Sep 06, 2012
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Choose experienced advisors early, including attorneys and auditors. Experienced advisors willexpedite the process and help avoid glitches and delays in your SEC review. Speed matters. Execution is critical.
Identiy prospective investment bankers and leading analysts in your market space.Consider the appropriate number and mix o managing underwriting rms and which ones can “get the dealsold” i market conditions turn against you.
AUdited FinAnciAl stAtements.
Make sure your audited nancial statements are close to nal. You willonly need two ull years o audited nancial statements in your SEC lings i you qualiy as an “emerging growthcompany,” but many companies are still electing to include three years. I you have switched auditors during thatperiod, consult with both rms, as your current rm may need to re-audit prior years.
other FinAnciAl stAtements.
Consider when your quarterly interim nancial statements will becomeavailable and understand the impact this will have on the timing o your SEC lings. Make sure you are in aposition to assemble up to three years o “selected” nancial data (unless you have been in business or a shorterperiod). I you have undertaken acquisitions or other signicant transactions, understand what additionalnancial statements may be required in your ling, including pro orma nancial statements and separateaudited nancial statements related to the acquired businesses.
AccoUnting issUes.
Identiy any sensitive issues in your signicant accounting policies. Discuss thesewith your audit team and make sure they discuss them with their “national oce”. The SEC’s “hot issues” areconstantly evolving, oten unpredictably and without ormal notice.
cheAp stock.
One SEC hot issue that won’t change is the “cheap stock” analysis—whether sucient chargeshave been taken in the past or stock options and other equity grants. This issue has become more critical asthe IRS has announced it will be targeting companies with cheap stock charges disclosed in their SEC lingsor Section 409A enorcement. Work closely with your auditors and counsel to analyze this issue. Do this early.
stock vAlUAtions.
I you haven’t already done so, engage an independent valuation expert to perormregular stock valuations to help you price option grants going orward. Many pre-IPO companies perormvaluations on a quarterly basis, i not more oten, depending on their option granting schedule. Consult withyour valuation expert regarding their willingness to consent to being named in your SEC lings.
in Preparing for an IPO
Cooley InsIghts:
 vim.
which stock exchAnge? .
Understand the benets o the alternative stock exchanges—NYSE, Nasdaq,NYSE AMEX or even AIM in London. Analyze the listing standards o your preerred market to ensure you willqualiy to list there.
BoArd And committees.
Reassess the composition o your board o directors and board committees toidentiy any changes necessary to satisy exchange listing requirements and SEC requirements. Understandthe requirements or independent directors and the transition rules that will apply ater your IPO.
corporAte governAnce.
Begin to act like a public company. Focus on corporate governanceappropriate or a public company and develop a culture o compliance. Work with counsel to adopt state-o-the-art corporate policies and codes o conduct.
mAnAgement teAm.
Build out your senior management team, as necessary, to operate as a public company.
execUtive compensAtion.
Consider engaging a compensation consultant to assist in analyzingcompensation practices, including equity and non-equity incentives. Begin to develop a compensationstructure appropriate or a public company.
internAl FinAnciAl controls.
Discuss with your advisors any “material weaknesses” or “signicantdeciencies” in your internal nancial controls and understand their impact on your SEC review. Be prepared todiscuss these orthrightly with your underwriters and to disclose them publicly.
sox compliAnce.
Understand the transition period over which you will need to become compliant with theinternal controls testing required by Section 404 o the Sarbanes-Oxley Act. Consider engaging an accountingconsultancy rm now to assist with compliance.
Ensure that your audit rm is properly “independent” rom your company under PCAOB and SECrules. Don’t hire employees o your audit rm without rst understanding whether that will compromise therm’s independence. Understand what relationships there may be between your auditors and your ocers anddirectors, including whether the rm has provided any tax services to your ocers.
pUBlic commUnicAtions.
Discuss with counsel the rules that will govern your public communicationsduring the IPO process. Standardize public communications to establish a track record, and developconsistent processes or external communications, including review o press releases by outside counsel.Beware o media interviews and public appearances, including industry or analyst conerences.
corporAte weBsite.
Perorm a review o your company’s website to ensure that the inormation on thewebsite is accurate and current. Work with counsel to make sure that the website is consistent with SECpositions on acceptable public communications prior to an IPO and permissible website content.
corporAte docUments.
Understand the provisions o your current charter, bylaws and other corporatedocuments as they relate to an IPO. Who has registration rights? Are any special approvals required romstockholders or third parties? Will your preerred stock automatically convert? Are all stockholders andoptionholders required to sign 180-day “lock up” agreements with your underwriters? Make sure that yourcapitalization records accurately refect all stock issuances, transers and cancellations, as well as option andwarrant issuances, exercises and cancellations.
25 ConsIderatIons In PreParIng for an IPo

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