Do you have the cash and the cache to go public? Will your business survive in case you decide to go public? Can you negate publicity when your stocks fall short? How will you react if a major IPO player wrestles the company you built from scratch out of your hands? In truth, are you ready for your company to be up on the boards for an IPO?
Such leading questions will reveal if you have the guts and the glory to put your company up for an IPO.
If you are ready to have your company publicly listed, here’s how to prepare for it.
Hire a lawyer who can counsel you on the IPO process. It’s great that you are taking this step because you feel that your business is doing impressive business and you want the public to know it but wanting to go public is not going to be easy nor will it come cheap. You have to hire a seasoned lawyer, one that has experience in securities, to guide you. One of the best law firms dealing with this sort of business is Kirkland&Ellis LLP. Check their website at kirkland.com.
Put up the money you need for taking your company public. As mentioned, you have to be ready for the amount of money involved in this undertaking. The NYSE requires companies to have pre-tax earnings of $10 million from the last three years of your company’s performance. This is on top of the minimum $2 million profit for two years running. NASDAQ needs to see your company doing more than $11 million in the last three consecutive fiscal years and another $2.2 million minimum over the last couple of years. These are no small potatoes for a company who wants to become a part of the big boys. There are alternative markets for you to try like the NASDAQ Global Market, AMEX, and NASDAQ Capital Market. Though these alternatives have lower requirements, you ill still need to put up millions to get things going.
Comply with SEC regulations. You need to have the following documents for the SEC:
- Audited financial statements including pre-tax income
- Product information
- Management and business portfolio including shareholders
- Market Value and Share Size of Public Float
- Share Price
Review your company’s management team. You don’t need to hire a strong Chief Financial Officer (CFO) with experience in IPOs. You have your lawyer for that. What you need to do is take a good hard look at your management team and their communication skills. Your management team will present the IPO to the market and will work with you on establishing your company with the different exchanges, analysts, and investors.
Hold a beauty contest. Players in the IPO industry know what a beauty contest is. This means choosing among investment banking partners to represent your company as a goodwill representative. Your investment banking partner will testify to your company’s value and worth as an IPO player. Look for an investment banking partner that knows your business inside and out and has represented other companies in IPO bids.
Once you have these in order, proceed to drafting your presentation by positioning your company as an IPO-worthy company and then file the registration papers with the SEC.