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    How To IPO Your Startup 1682653852

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    The document outlines the 8 main steps in the IPO process: 1) Choosing an underwriter, 2) Conducting due diligence, 3) Submitting regulatory filings to the SEC, 4) Conducting an IPO roadshow, 5) Setting the IPO price, 6) Going public on the stock exchange, 7) Using post-IPO stabilization tools, and 8) Beginning the transition to market competition. Key documents that are drafted include the engagement letter, letter of intent, and S-1 registration statement filed with the SEC. Pricing an IPO depends on factors like discounted cash flow analysis, comparable public companies, and precedent private transactions.

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    How To IPO Your Startup 1682653852

    Uploaded by

    abishekburner
    5 views4 pages
    The document outlines the 8 main steps in the IPO process: 1) Choosing an underwriter, 2) Conducting due diligence, 3) Submitting regulatory filings to the SEC, 4) Conducting an IPO roadshow, 5) Setting the IPO price, 6) Going public on the stock exchange, 7) Using post-IPO stabilization tools, and 8) Beginning the transition to market competition. Key documents that are drafted include the engagement letter, letter of intent, and S-1 registration statement filed with the SEC. Pricing an IPO depends on factors like discounted cash flow analysis, comparable public companies, and precedent private transactions.

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    How to IPO Your Startup 1682653852

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    The document outlines the 8 main steps in the IPO process: 1) Choosing an underwriter, 2) Conducting due diligence, 3) Submitting regulatory filings to the SEC, 4) Conducting an IPO roadshow, 5) Setting the IPO price, 6) Going public on the stock exchange, 7) Using post-IPO stabilization tools, and 8) Beginning the transition to market competition. Key documents that are drafted include the engagement letter, letter of intent, and S-1 registration statement filed with the SEC. Pricing an IPO depends on factors like discounted cash flow analysis, comparable public companies, and precedent private transactions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    5 views4 pages

    How To IPO Your Startup 1682653852

    Uploaded by

    abishekburner
    The document outlines the 8 main steps in the IPO process: 1) Choosing an underwriter, 2) Conducting due diligence, 3) Submitting regulatory filings to the SEC, 4) Conducting an IPO roadshow, 5) Setting the IPO price, 6) Going public on the stock exchange, 7) Using post-IPO stabilization tools, and 8) Beginning the transition to market competition. Key documents that are drafted include the engagement letter, letter of intent, and S-1 registration statement filed with the SEC. Pricing an IPO depends on factors like discounted cash flow analysis, comparable public companies, and precedent private transactions.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 4

    Pitchbook's Guide to the IPO

    Process

    Source: Pitchbook

    8 Steps involved in the IPO process:


    1. Choose an IPO underwriter
    The issuing company selects a reputable investment bank to underwrite on the IPO.

    2. Conduct due diligence


    Underwriters and legal counsel investigate the company with the goal of understanding any
    risks.

    3. Submit IPO regulatory filings


    The IPO team compiles information that is required for IPO documentation, including:
    ● Letter of intent
    ● Red Herring document
    ● S-1 paperwork with the SEC

    4. Go on IPO roadshow
    The issuing company and underwriters market the shares to institutional investors during the
    IPO roadshow in order to generate interest and estimate the demand for shares.

    5. Set the IPO price


    After SEC approval, the IPO team finalizes the initial offer price and the amount of shares being
    issued based on:
    ● Investor demand
    ● Company financials

    6. Go public on the stock exchange


    On the day of the IPO, the underwriter will release the initial shares to the public market.

    7. Use after-market stabilization tools


    Following the IPO, underwriters have the ability to trade and influence pricing, but only for a
    25-day quiet period. Stabilization strategies include the greenshoe option and lock-up periods.

    8. Begin transition to market competition


    Once out of the quiet period, the company’s stock is fully subjected to market conditions. The
    underwriter can evaluate the post-IPO valuation and earnings, but ultimately transitions to an
    advisor role.

    Documents for the IPO Process

    Agreeing to terms with underwriter and issuing company:


    ● Firm commitment: States the underwriter will purchase all shares from the issuing
    company and resell them to the public.
    ● Best efforts agreement: States the underwriter will not guarantee a specific amount of
    money but will sell the share on behalf of the company.
    ● Syndicate of underwriters: An alliance between a group of investment banks to sell part
    of the IPO, which diversifies the risk.

    The underwriter will draft:


    ● Engagement letter: Includes reimbursement clause, which holds the issuing company
    accountable to covering the underwriter’s out-of-pocket expenses. Also includes the
    gross spread, also known as the underwriting discount, which is intended to cover the
    underwriter’s fee.
    ● Letter of intent: States underwriters commitment to the company and the company’s
    agreement to cooperate, provide all information, and offer the underwriter a 15%
    overallotment option.
    ● Red Herring document: A preliminary prospectus that has information on the company’s
    operations, but doesn’t include share price or number of shares.

    Required documentation by the SEC:


    ● S-1 registration statement: The primary document for filing the IPO. It is made up of two
    parts: The prospectus and private information that is not required to be disclosed to
    investors, but must be reported to the SEC. It also includes the expected IPO date. In
    essence, the S-1 filing is the first peek into the financial underbelly of a company.

    Quick FAQs on the IPO process


    How long does it take to complete the IPO process?
    If the team managing the IPO is well organized, then it will typically take 6-9 months for the
    company to complete its public debut.

    What is an underwriter and how do you choose one to work with?


    An IPO underwriter is synonymous with the investment bank providing the underwriting service.
    Underwriters lead the IPO process and are chosen by the company, which could decide to hire a
    team of underwriters to manage different parts of the IPO.

    The success of an IPO relies heavily on choosing the right underwriter. Companies will look at a
    firm’s reputation, their quality of research and industry expertise when considering investment
    banks to work with. After choosing an IPO underwriter, the two parties will formally agree to
    terms through an underwriting agreement. This includes the amount of capital the underwriter
    receives during the IPO, which is typically between 5-8%.

    Who is a part of the IPO team?


    The IPO team consists of executives at the issuing company, underwriters, lawyers, certified
    public accountants (CPAs) and Securities and Exchange Commission (SEC) experts. This team
    is responsible for taking the company through the IPO process, handling the complex transition
    from private to public and every important decision that accompanies the journey.

    What is IPO due diligence?


    Due diligence is a standard process for any investment workflow. For IPOs, it is an investigation
    into the private company’s financials and the potential risk factors of going public. During this
    workflow, the company and IPO underwriters will fill out the required paperwork. The issuing
    company will also register with the SEC.

    What is an IPO roadshow?


    The IPO roadshow is a company’s chance to market and drum up interest for shares. It is also a
    way to gauge demand for shares, helping the underwriters navigate the IPO process.
    Traditionally, the company and underwriters travel to different locations—however, digital
    roadshows became the norm during the COVID-19 pandemic and have the potential to become
    the standard moving forward.

    Can a company IPO twice?


    Yes, a company can offer subsequent market share through a Follow-on Public Offering (FPO.)
    This occurs when a business raises capital in a second round of stock through either dilutive or
    non-dilutive options.

    By its very nature, a dilutive offering, or what’s known as a stock dilution decreases shareholder
    company ownership by offering additional equity. Issuing supplementary shares affects
    company insiders or VCs with majority stakes. To protect against control dilution, VC contracts
    often include an anti-dilution clause that acknowledges their status as a primary investor and
    safeguards their equity.

    In a dilutive stock offering, a company’s board of directors increases the portion of shares that
    belong to all public investors to increase capital flow to the company. The income from this
    secondary public subsidy can be used for further growth and development or to pay off a debt.

    How are IPOs valued and priced?


    Pricing and valuing an IPO depends on many factors, not just the company itself. Market
    conditions and demand also play a strong role in the valuation. There are a couple intrinsic and
    relative valuation methods that are used to value a company:

    ● Discounted cash flow analysis, an intrinsic valuation method that looks at the value of an
    investment based on its projected future cash flows.

    ● Comparable public company analysis, a relative valuation method that compares


    publicly traded companies operating in a similar sector and location to the valuation
    company, usually with similar levels of revenue and market capitalization.

    ● Precedent translation or private comparable analysis, a relative valuation method that


    looks at historical prices for completed deals within the private markets that involve
    similar companies.

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