Most companies start off being privately held, with all shares of stock being owned by one to a few individuals. Typically they are owners, relatives of the owners or people who have invested some money into the business. When the shareholders of a privately held company want to make their company’s shares available for purchase by the public, the company will need to issue an Initial Public Offering (IPO). The Securities and Exchange Commission (SEC) is the entity responsible for monitoring the buying and selling of stocks and have some very specific rules that need to be followed to do an IPO.
Determine how much money you want to raise. Keep in mind that you will have to compensate a team of professionals that will help you with the IPO from this money. Whether you want to raise $5 million or $50 million, your team must feel it is worth their time and effort.
Hire a good management team that is experienced in your industry. The SEC has specific requirements for impartiality on audit committees of public firms. This means you may no longer be able to fulfill some of your previous company roles.
Select an underwriter. The underwriter will help with the registration process and to find investors. Ask for presentations from several investment bankers in your area.
Select an attorney. The attorney needs to be sure that all of the documents are up to the legal specifications required for an IPO. Your underwriter can recommend an attorney.
Select an auditor. This auditor should have no personal or business relationship with your company. They will be required to provide accurate financial information about your company to the people or institutions thinking about investing.
File a SEC Registration Statement. The statement goes to the SEC and to the financial exchange that will be listing your stock. To prepare for this you will need a full description of your company’s operations, its financial statements and its management. While there are very specific information requirements to Part 1 of the form, the second parts looks for any other information that you can provide. The best way to present the information for Part 2 is to create something similar to a company brochure.
Amend the registration form to deal with any comments that you receive back from the SEC. You will receive these comments approximately 5 weeks after you first file the registration form. These comments must be responded to, along with any additional information that the SEC is requesting.
Prepare a prospectus, a formal statement of your company, including its business plan, its position in the industry, its financial status and anything else that your underwriter feels is important for a potential investor to know.
Prepare a presentation to show potential investors. This is called the "Road Show" and is a very important part of the process since you will be marketing your company and its IPO. It should show the best features of your company and inform why investing in your company is an excellent idea.
Present your Road Show to potential investors. This is the most critical part, and your final step, in the process. You must be successful in your presentation to encourage your potential investors to actually become investors.
If you feel the process is too difficult to handle yourself, there are consulting firms that you can hire.
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