“The New Game Plan For
An IPO”
Brett White
Cooley Godward
May 19, 2001
Why Go Public
1. Growth Capital at Best Available
Valuation
2. Currency for Future Acquisitions
3. Liquidity for Management and Other
Shareholders
4. Validation of the Company
Why Not Go Public
1. Lose Ability to be Quick, Silent and
Nimble
2. Big Drain on Management Time
3. Open Kimono to Competitors
4. Employee Recruitment and Retention
More Difficult
Why Not Go Public (continued)
5. High Administrative Cost
6. Attracts Lawsuits of all Sorts
7. Can Cause Complacency; Lack of
Focus
Can You Go Public?
It’s a tough market out there
Maturity of the company
Revenue and profitability expectations
IPO Pricings By Quarter
144
144
133
140
136
133
120
# of IPO Pricings
102
100
80
68
56
60
40
24
20
0
1Q
2Q
3Q
1999
4Q
1Q
2Q
3Q
2000
4Q
1Q
2001
IPO Pricing By Industry
2000
Telecommunications
(87)
Other (non-technology)
(122)
Computer Software &
Services
Energy
(12)
(78)
Computer Hardware
(21)
Electronics
(41)
Biotechnology
(50)
IPO Pricing By Industry
1Q 2001
Energy
(6)
Other
(non-technology)
(8)
Drugs
(3)
Computer Hardware
(1)
Electronics &
Miscellaneous
Technology
(1)
Computer Software
& Services
(2)
Pre-IPO Planning
1. Legal Due Diligence Review
2. Review Capitalization Issues
a. Stock split (want to get into the “range”)
b. Authorized Capital
c. Automatic conversion of preferred stock
d. Rule 701 compliance
Pre-IPO Planning (continued)
3. Board of Directors Makeup
a. Nasdaq listing requires three independent
members for audit committee
b. Underwriters may require other changes
c. Audit and Compensation Committees
4. Accounting Issues
a. Revenue recognition (SAB 101)
b. Cheap stock review
c. Option Repricings
Pre-IPO Planning (continued)
5. Delaware Reincorporation
6. Employee Stock Matters
7. Anything Else that Requires
Stockholder Approval
8. Publicity
Choosing An Underwriter
1. How interested are they?
2. Transaction experience
3. Industry capability
4. Distribution knowledge
5. After deal research and support
6. Preliminary valuations
The IPO Process
1. Once you have chosen an Underwriter,
you are now “in registration” and in the
“quiet period”
2. Initial Organization Meeting
a. Review the schedule
b. Discuss offering terms
c. Review legal issues
d. Accounting issues
e. Publicity issues; industry conferences
f. Directed shares
The IPO Process (continued)
3. Company Diligence Sessions and
Drafting
a. Management must be involved heavily
b. During this time, Underwriters conduct
their customer and legal due diligence
The IPO Process (continued)
4. File Registration Statement
a. Generally 4-6 weeks after Org. Meeting
b. You are now in the “waiting period”
5. Address Other Items
a. Nasdaq Listing
b. Stockholder Approvals
The IPO Process (continued)
6. Obtain SEC comments (30 days after
filing) and respond (usually one week or
so)
7. Road Show (2-2½ weeks; respond to
further SEC Comments)
8. Pricing the deal and going “effective”
SEC Hot Issues
1. Cheap Stock
2. Gun-Jumping
3. Revenue Recognition
4. Directed Shares
5. Stock Option Repricings
What Happens After IPO?
1. Ongoing Reporting
2. Dancing with Wolves - Analysts