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The IPO process
Underwriter internal approvals: Prior to
filing the initial draft registration statement
with the SEC, or otherwise making public
the underwriters’ names in connection
with the IPO, the underwriters will
typically need to clear internal committees.
This involves presenting the company
to an internal committee, a review of the
draft registration statement disclosure and
discussion of any issues that came to light
during the due diligence process.
SEC submission of draft registration
statement: To commence the process of SEC
review of the registration statement, the
company must file it with the SEC, together
with various exhibits. Under the JOBS Act,
emerging growth companies have the option
of making a confidential submission, as
opposed to a public filing, and many EGCs
take advantage of this option, as discussed
further in Section 4.3. Companies that elect
confidential review must make a public filing
of the draft registration statement at least 21
days before the start of the IPO roadshow.
The waiting period
(d) Weeks 7 to 8
Roadshow presentation and marketing
strategy: While the IPO working group
awaits comments from the SEC on the
draft registration statement, it is prudent
to further develop the marketing story for
the IPO roadshow. The lead bookrunner(s)
will generally spearhead this process,
while working closely with the company
to create a short, detailed slide deck to be
shown to investors during the roadshow.
This presentation is typically 20 to 30
slides in length and details the offering,
the company’s products and services, key
selling points, industry trends and growth
opportunities, competitive positioning and
financial performance.
For EGCs, as discussed further in Section
4.3, another topic of discussion with the
bookrunners is whether to take advantage
of the JOBS Act provisions allowing them to
“test the waters” prior to launch of the IPO,
in order to assess potential demand for the
offering and identify and address any issues
that investors may raise.
Legal and other documentation:
Continue drafting and negotiating legal
documentation and comfort letter
Agree on offering structure: The company,
in conjunction with the lead bookrunner(s),
should determine the appropriate proceeds
to raise in the IPO in order to be well
capitalized for 18 to 24 months after the
IPO, taking into account its strategic goals,
as outlined in the registration statement. In
addition, the company should approach its
shareholders and discuss the extent to which
they may wish to sell part of their holdings
in the IPO. In doing so, the company will
be mindful of any IPO participation rights
granted to shareholders under registration
rights and other similar agreements that
may exist with existing stock holders.
(e) Weeks 9 to 13
Receiving and addressing SEC comments:
The SEC takes approximately 30 days to
complete its initial review of the draft
registration statement, at which point it will
respond to the company and its counsel via
a formal comment letter in which it makes
certain observations on the company’s
draft disclosure and invites the company
to address these by making revisions and
filing a series of amendments, to its draft
registration statement. The initial comment
letter is the beginning of an iterative process
with the SEC, which typically requires at
least three amendments and can last up to
six weeks, depending on a number of variables.
Legal and other documentation:
Continue drafting and negotiating legal
documentation and comfort letter.
Roadshow presentation: Continue refining
the roadshow presentation and rehearsals
with CEO/CFO and any other members of
the roadshow team.
Valuation and price range discussions:
Continue periodic valuation discussions
with the underwriters and formulate a
preliminary price range to be provided
confidentially to the SEC as an indication
of where the offering price range will
be. This often involves a share split or
consolidation to achieve the desired range.
Agree on marketing strategy: The company
and the bookrunners should decide which
regions and specific cities to visit on the
IPO roadshow, the length of the roadshow
and which investors to target as potential
buyers of the IPO.
The marketing/execution phase
(f) Week 14
Registration statement and other
documentation: Having cleared all SEC
comments and amended the registration
statement to reflect any stock split and
the offering price range, finalize all other
documentation, including underwriting
agreement, comfort letter and launch press
release.
Roadshow preparation: Finalize the roadshow
presentation, hold roadshow rehearsals and
make all logistical preparations for roadshow
launch. Finalize legal documentation.
(g) Weeks 15 and 16
Launch IPO: File an amendment to the
registration statement with price range
(the so-called “red herring”): Conduct
management presentations to the
bookrunners’ equity sales forces, and
commence the roadshow, consisting of
between 8 and 12 days of investor meetings.
Pricing and closing: Having built a book
of demand, the bookrunners will agree
on the offering price with the company
and shareholders and, having executed
the underwriting agreement, proceed to
allocate the IPO to investors. The following
day, the company begins publicly trading on
the NYSE, rings the opening bell and hosts
other key marketing events associated with
being a public company. Three business
days later, the IPO closes, at which point
stock is delivered to investors against
payment of the offering price, and various
legal opinions are delivered by counsel.
(h) Aftermarket
Depending on the trading performance
of the stock, the underwriters may either
intervene to “stabilize” the stock in order
to smooth out short-term volatility (in the
case of a stock that falls below issue price
post-IPO) or exercise the greenshoe (in
the case of a stock that trades comfortably
above issue price post-IPO).
3.2 SEC registration
Cleary Gottlieb Steen & Hamilton LLP
Before undertaking an IPO, the company
must file a registration statement with
the SEC, and it must be declared effective
NYSE IPO Guide
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