Dig Deeper: How to File a Registration Statement
Organize the road show.
The road show is launched once the issuer has responded to and resolved the SEC staff's material comments, generally through multiple amendments to the registration statement. That's when the issuer will print the 'reds' -- the preliminary prospectus setting forth an anticipated offering size and anticipated price range. They call it the "road show" because it typically lasts for up to two weeks, during which time senior managers meet prospective investors, often in multiple cities in the same day. "It really is taking the show on the road," Rowe says. "It's not uncommon to be in two or three cities a day for five days a week. You have investor meetings every waking moment of the day, including investor breakfasts and lunches, all with the intention of building a book for the underwriters so the IPO can succeed."
Dig Deeper: Making the Most of the IPO Road Show
Price the IPO.
When the review process is completed and the underwriters have 'built a book' of prospective IPO investors, the issuer's board of directors -- typically through a pricing committee -- and the underwriters will set a price at which the company and any selling stockholders will agree to sell shares to the underwriters at closing. The pricing usually occurs after the close of the markets on the final day of the road show; the stock will begin trading on the exchange on a 'when issued' basis the next morning.
Typically, Rowe says, companies will reconstitute their capital structure so that they can target a price of between $14 and $16 per share, a range that is attractive to most IPO investors. "At pricing, you want to maximize the price yet you don't want to overprice the offering just to get the last dollar out," Rowe says. "It's critical that the stock to perform well in the aftermarket." If the stock trades down, it can create bad publicity for your company and can make it exceedingly difficult to complete a follow-on offering in the future.
Dig Deeper: Assessing One Company's Grim IPO Price
Complete the offering and begin life as a public company.
The IPO will typically close on the fourth business day after the pricing. At that time, the issuer and any selling stockholders will release the shares to the underwriters, and the underwriters will purchase the shares, frequently at a 7 percent discount to the price at which they have offered the shares to the public -- that's their fee. The issuer will continue to be in an SEC quiet period for 25 days following the pricing -- the period during which broker-dealers have an obligation to deliver prospectuses to investors. During that period, the company must continue to be circumspect in what, if anything, it says to the public outside of the IPO prospectus. Following the expiration of the quiet period, the company will be in frequent communication with the market, both through its periodic SEC filings and in its interaction with the analyst and investor communities.
Dig Deeper: How to Grow Fast
Related Links:
More Articles from Inc.com on Taking a Company Public
IPO basics, players and paperwork, big decisions, and cautionary tales.
"Two IPOs Beat the Odds"
OpenTable and SolarWinds go public and see their initial public offerings soar.
"IPOs Hit a 30-Year Low"
But the guy who took Google and Netscape public is not concerned.
"Venture-Backed IPOs Top $4.27 Billion"
More companies are going public, led by the technology sector, but mergers and acquisitions have slowed.
Recommended Resources:
Nasdaq's Listing Requirements and Fees
Information for companies interested in having stock publically traded on the Nasdaq market.
New York Stock Exchange (NYSE)
NYSE's listing requirements for companies that want to have stock publically traded on the exchange.
NYSE Amex
Listing standards for the NYSE Amex exchange.
National Venture Capital Association (NVCA) -- Made up of 400 member firms, the trade association for the U.S. venture capital industry provides information for entrepreneurs and investors and current research on the venture capital industry.
Securities and Exchange Commission (SEC) -- The SEC provides information for companies considering an IPO, including this section on guidance for small companies considering an initial public offering of stock.
Grant Thornton
Going Public: A Guide for Owners
