Raising Money - Ready To Tackle An IPO?
YOUR BEST OFFERING
By David Worrell
Ready To Tackle An IPO? Here’s What You’ll Need To Make All Of The Right Moves And Avoid The Wrong Ones.
Deciding to take a company public seems simple, but doing it is another matter. “It is a excruciating process, to say the least,” says Joseph Visconti, founder and CEO of ValueRich,a magazine publisher and media company that started trading on the American Stock Exchange under the symbol IVA in August.
Here’s a road map of what ValueRich went through to run an IPO—and what any private company can expect to face.
1. HIRING A TEAM: Running an IPO is not something a CEO can do alone. To pull it off, you’ll need a team that includes a lead investment bank and secondary bankers to underwrite the offering and promote the stock to investors and a raft of auditors, securities lawyers and analysts. Selecting the right team can be challenging. “Have a bake-off” says Deron Curliss, a partner in the Madison, Wisconsin, office of Grant Thornton, a public accounting firm. “Have four or five investment banks come in to pitch to the company, and look at their ability to sell the deal.” Every member of the team should have some industry expertise and a track record of successful IPOs under their belts.
2. WRITING: The team’s main job is to agree on the substance of the SEC filing document – simply called the S-1. Each member takes a section, while the CEO or CFO plays quarterback. Start by getting everyone in the same room. “This organizational meeting is to education the team on the current state of the company and where it’s going,” says Curliss. Plan on two to three months for all the parties to finish writing.
3. THE PRINTER: Eventually a draft of the S-1 goes to a financial printer. “That’s where the document is put into its final format for electronic submission to the SEC,”says Curliss. Plan on spending two to four days there going over each word and coordinating final edits from each team member.
4. COMMENTS AND RESPONSES: The SEC will ask questions; that’s their job. Your job is to coordinate clearly articulated responses in writing. This 30 to 45 day cycle could repeat six to eight times. Eventually, the SEC will relent. At this point, you have a “red herring” – a prospectus that you can show investors.
5. THE ROAD SHOW: Jetting all over the work to meet investors may sound like fun, but expect a grueling travel schedule. Thanks to particularly volatile markets during Visconti’s road show it was a struggle to keep investors committed. “A buyer on Day One may not be a buyer 20 days later,” says the 43 year old. “We had to sell the deal a couple of times.” Visconti visited New York City at least a dozen times to get the job done.
6. FINISHING: The homestretch is a race against time. The road show, the investor commitments and the pricing have to be finished within 135 days of the last official filing of your company’s financials so the numbers don’t get stale. If you delay, Curliss warns, “you could have to add a whole new quarter or year to the process, depending on the timing.”
7. TRADING: When a final price is decided on and final S-1 amendments have been filed, the SEC can declare your application “effective” and trading of your stock can begin.
8. SOX: The fun isn’t completely over yet. Various SEC rules and Sarbanes-Oxley legislation govern how a public company must be run – including when executives can sell shares. Visconti says that taking ValueRich public took more than a year and cost nearly $1 million in fees and expenses. But all the work was worth it in the end: “We’re listed on the Amex, we have $5 million in capital, and the prospects for the future are extremely exciting.”