According to stockanalysis.com, 2021 has been a record-breaking year for initial public offerings (IPOs). As of this writing, there have been 1,007 IPOs on the U.S. stock market, which crushes the previous record of 2020 (480) and the one prior to that (397 in the year 2000).
If you’re preparing to go public in 2022 in order to fuel your growth, you already know that there is plenty to get ready. Perhaps you’ve already taken the first step in the process and selected an investment bank to advise you and perform all underwriting. Once you have a letter of engagement in place and an agreement in place, it’s time for the arduous administrative task of preparing the registration statement that is required by the U.S. Securities and Exchange Commission (SEC).
The registration statement (filed on SEC Form S-1) has two parts, according to the SEC:
- The prospectus – This is the legal offering document that must be provided to everyone buying the securities. This is where your company must describe your operations, financial condition, results of operations, risk factors, and management. It also includes audited financial statements.
- Additional information and exhibits – The company does not have to deliver this information to investor, but it still must be filed with the SEC.
This is a highly regulated process and one that can easily overwhelm companies that do not have the resources to dedicate entirely to this series of tasks (in addition to everything else they need to do to prepare for the IPO). There are several things to understand about the filing requirement:
- You need to determine the appropriate financial statements to include. What you must file depends on several factors, including your existing legal form and whether you plan to undergo a corporate reorganization before filing the IPO. Sometimes financial statements of the company going public alone will not suffice. Depending on your legal structure, history and other things, you might need to file other financial statements of recently organized “shell” companies, predecessor financial statements and other statements.
- Companies must present financial statements that are consistent with public entity accounting principles. That means you must meet all disclosure requirements for all periods presented. This could include statements or disclosures on segment reporting, earnings per share, income tax related disclosures, temporary equity classification of redeemable securities, and more.
- Small, growing companies have different disclosure requirements. A company qualifies as an emerging growth company if it has total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year and, as of December 8, 2011, had not sold common equity securities under a registration statement. Companies like this have less extensive narrative disclosure requirements than other reporting companies and only have to provide audited financial statements for two years instead of the typical three.
Obviously, it helps to have people in your company with the skills and experience to handle these and all other to-dos. You need to have team members who are knowledgeable about SEC reporting requirements of public companies, U.S. Generally Accepted Accounting Principles (GAAP), valuations, and more. You also might need help making sure your internal controls meet SEC requirements (and documenting those controls).
TGRP Solutions Can Help
TGRP Solutions can help your company with this and all other necessary steps in anticipation of your IPO. Whether you are laying the groundwork years ahead of time and want help implementing a modern accounting system and getting all your processes and documentation cleaned up, or you’re looking for guidance in preparing the registration statement, our consulting team can assist.
Contact us to learn more about how we will help you approach the pre-IPO process the right way.