Going Public
Chapter 16
Going Public
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What does it mean to “go public”?
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Initial Public Offering
Advantages
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Obtaining New Equity Capital
Enhanced Ability to Borrow
Enhanced Ability to Increase Equity
Liquidity & Valuation
Prestige ad Personal Wealth
Disadvantages
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Potential Loss of Control
Public Exposure
Money and Time
Sarbanes-Oxley
Costs
Costs of Going Public
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Average cost= $500,000
SEC Reports
Accounting fees
Legal fees
Underwriter
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Underwriter’s discount
SEC fees- .02%
NASD fees- .01%
Printing costs
Alternatives to Going Public
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Private Placement of Securities
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Restrictive covenants
Liquidation covenants
Bank loans
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Drawbacks
Timing of Going Public
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Is Company Large Enough?
What is Amount of Earnings and Strength
of Financial Performance?
What are the Market Conditions?
How Urgent is the Need for Money?
What are the Needs and Desires of
Owners?
Underwriter Selection
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Start the “Process”
Select Managing Underwriter
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Will develop a syndicate
Mutual contact/referrals
What should you look for?
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Reputation
Experience
Cost
Distribution Capacity
Advisory Services
Registration Statement & Cost
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Next Step= Planning Meeting
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Length of time for registration process
Common hold-ups
Registration Statement
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Prospectus
Registration statement
Securities & Exchange Act
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Form S-1
The Prospectus
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Cover Page
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Preliminary
Final
Table of Contents and Executive Summary
Introduction
Risk Factors
Use of Proceeds
Dividend Policy
The Prospectus
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Capitalization
Dilution
Financial Data
Business
Management & Owners
Capital Stock
Underwriter Information
Actual Financial Statements
Prodcedure
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Red Herring
Comment Letter
Pricing Amendment
Other Issues
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Legal Issues
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Quiet period
Length
 Why?
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Blue-sky Qualifications
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State laws
Effects
After Going Public
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Aftermarket Support
Relationship with Financial Community
Reporting Requirements
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10-Q
8-K
Sarbanes-Oxley
Proxy Solicitations
Myths
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In this market, high-tech is the name of
the game
If you’re doing OK, don’t worry about the
aftermarket
The analysts will follow you through think
and thin
The young entrepreneurial companies will
continue to get the spotlight this year
Myths
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You need to be profitable to get a high
valuation in this market
Of course, you want to be the next
Netscape
During your IPO, you’re the center of
attention
Somebody knows where the IPO market is
headed