Initial Public Offerings 101

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Also note: This is not legal advice.

Introduction

IPOs offer companies a unique opportunity to access large amounts of capital quickly and efficiently, allowing them to take advantage of new opportunities and expand their operations. For investors, buying into an IPO is an attractive prospect as it offers them the potential to earn a significant return on their investment. And for companies, going public can provide prestige and credibility which can be invaluable when seeking further investment.

The Genie AI team understand why IPOs are so important for our clients’ financial strategies. Our open source legal template library contains millions of data points that show what a market-standard initial public offering looks like – so anyone can draft their documents without consulting a lawyer. And with our step-by-step guidance and free templates available today, the Genie AI community makes IPOs easier than ever before.

As well as raising capital, IPOs may also be used to reward employees by offering them shares in the company at discount rates – further boosting morale within your organisation. Of course, this comes with its own risks; when taking a company public the announcement may affect consensus differently depending on the industry or situation – something which we always advise our clients to consider carefully before making any decisions.

At Genie AI we’re dedicated to making sure everyone has access to high quality documents when they need it most – read on below for step-by-step guidance and more information on how you can access our template library today!

Definitions (feel free to skip)

Initial Public Offering (IPO): The process of a company offering its securities (stocks, bonds, investment funds) to the public for the first time.
Fixed Price Offerings: An IPO in which the company sets a fixed price for the offering and investors can purchase shares at that price.
Book Building Offerings: An IPO in which the company and its investment bank set a range of prices for the offering and investors can place orders at various prices within the range.
Best Efforts Offerings: An IPO in which the company and its investment bank do not guarantee that the offering will be completed.
Dutch Auctions: An IPO in which the company and its investment bank set a price range for the offering, and investors can place orders at various prices within the range and the final price is determined based on the lowest price within the range that will result in the desired amount of capital being raised.
Generally Accepted Accounting Principles (GAAP): A set of standards and guidelines used to ensure that financial statements are compiled in a consistent and accurate manner.
Registration Statement: A document filed with the Securities and Exchange Commission (SEC) that includes detailed information about the company, its financials, and its business plans.
Blue Sky Laws: Laws in various states that are designed to protect investors from fraudulent securities offerings.
Exchange Listing Requirements: Requirements set by an exchange (e.g. the New York Stock Exchange) for listing a company’s stock on that exchange.
SEC Reporting Requirements: Requirements set by the Securities and Exchange Commission (SEC) for providing periodic reports and other documents.

Contents

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What is an Initial Public Offering (IPO)?

Advantages and Disadvantages of an IPO

Types of IPOs

Fixed Price Offerings

Book Building Offerings

You’ll know you can check this step off your list and move on to the next step when the IPO has closed.

Best Efforts Offerings

Dutch Auctions

You will know when you can check this off your list and move on to the next step when you have completed all of the steps above, including setting up the auction, collecting bids, and determining the winning bids.

Preparing for an IPO

Financial Statements

Investment Banking

Public Relations

Legal Documentation

Determining the Value of an IPO

Analyzing the Market

You will know you can check this off your list and move on to the next step when you have a clear understanding of the current market environment, market trends and past IPOs, the market’s performance, and the potential demand for the company’s shares in the market, as well as a thorough assessment of the company’s competitive position.

Assessing the Company’s Performance

You can check this step off the list when you have a comprehensive overview of the company’s performance and growth potential.

Setting the IPO Price

The IPO Process: Step-by-Step

You’ll know when you can check this off your list and move on to the next step when you have received approval from the SEC for the registration statement.

Filing the Registration Statement

Setting the Offering Price

Allocating the IPO Shares

Commencing Trading

Regulatory and Legal Requirements

You will know you have completed this step when you have a good understanding of the different regulations and legal requirements that must be met when preparing for an IPO.

SEC Requirements

Once the SEC requirements have been met, the company can move on to the next step: understanding and complying with state blue sky laws.

State Blue Sky Laws

Exchange Listing Requirements

After the IPO: Going Public

You can check this off your list when the Form 8-A and Form 10-Q have been filed with the SEC, an independent auditor has been appointed, the board of directors is established, all applicable regulations and listing requirements for the exchange are met, the company’s shares are listed on the exchange, and shareholders and the public have been notified of the company’s initial public offering.

Meeting SEC Reporting Requirements

Once you have completed all of the SEC reporting requirements, you can move on to the next step of adjusting to the public company environment.

Adjusting to the Public Company Environment

Potential Challenges

When you have developed a plan to address potential challenges, you will be ready to move on to the next step.

Managing Shareholder Relations

You can check off this step when you have implemented a plan to manage shareholder relations and established a system to respond to shareholder inquiries and monitor shareholder sentiment.

Managing Investor Expectations

You can check off this step when you have identified key investors and their expectations, communicated expectations to them, considered feedback and incorporated suggestions, monitored investor sentiment and adjusted messaging accordingly, updated investors regularly, and responded to investor inquiries promptly.

Managing the Pressure from the Market

You’ll know you have completed this step when you have a plan to manage the pressure from the market in place and are monitoring the market sentiment and the after-market trading of the IPO.

Potential Investment Opportunities

Taking Advantage of the Liquidity

How you’ll know when you can check this off your list and move on to the next step:
Once you have completed your research, assessed the liquidity of the stock, analyzed the risk associated with investing, determined the timing of the IPO, and executed your trade on the day of the IPO, you will be ready to move on to the next step in the guide.

Evaluating the Long-Term Investment Potential

When you have reviewed all the information and feel confident in the company’s long-term investment potential, you can move on to the next step.

Assessing the Risk of Investing in an IPO

FAQ:

Q: Is there a difference in the process and legal requirements between an SaaS company and a B2B company wanting to do an IPO?

Asked by Emma on June 9th, 2022.
A: There are several differences between SaaS companies and B2B companies when it comes to IPOs. Firstly, the amount of investment required for an IPO is usually different for each type of business. Secondly, the regulatory framework is different for each type of business, which may require additional paperwork or filing requirements. Thirdly, the type of investors that are likely to be interested in the IPO may differ depending on the type of business. Lastly, the type of financial reporting and other disclosure requirements may be different for each type of business. It is important to consider all of these factors when planning an IPO, as they can have a significant impact on the success of the offering.

Example dispute

Suing a Company for Misrepresenting an Initial Public Offering

Templates available (free to use)

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