We're all familiar with IPOs from the market perspective. We've seen the announcements and watched share price rise and fall. However, when it comes time to take a company public, we may not know the basics. For instance, how long is the IPO process? Do you know how to prepare your company for an IPO?
That's where this IPO readiness checklist comes into play. With the IPO checklist to guide you, you can prepare your company without missing any of the critical steps along the IPO process timeline.
Pre-IPO checklist
1. Making the Decision to Go Public
It might seem obvious, but the first step to an IPO is making the decision to take a company public. There are many reasons a company might decide to go public, such as:
- Gaining prestige or publicity
- Raising the profile of the business
- Attracting higher-caliber employees with benefits such as stock options
- Leveraging stock to acquire competitor companies
- Raising capital
- Creating business opportunities
Heading into 2025, there are numerous IPO trends that you should be aware of when going through the decision-making process. These include the increasing prominence of private equity-backed IPOs and the rise of SPACs as an alternative to going public. Understanding how these may influence your prospects and investors’ outlook is critical if you want to make the best impression. Part of taking a company public is selling investors on the business opportunity. Thus, it's important you be able to explain why this is the right next move.
2. Assembling a Purpose-Driven Team
Ensuring IPO readiness is a team effort. As soon as you decide to go public, you'll want to recruit the right people for your team:
- Investment bank: An investment bank works alongside your company to prepare for the IPO with services such as due diligence, underwriting, and acting as an intermediary among your business and potential shareholders.
- Law firm/attorneys: IPOs must comply with complex, ever-changing state and federal regulations. The SEC holds companies liable for any violations in SEC filings and has the right to file criminal and civil charges, so sound legal advice is essential.
- Accounting firm/auditors: Auditors go through all the business financials to make sure that information is accurate and up to date. They'll look at all company holdings and financial statements, then resolve any discrepancies so that the business can demonstrate the necessary compliance that regulators will want to see.
- Service providers: Service providers do the behind-the-scenes work of helping all the parties involved in the IPO collaborate. A virtual data room is a great example of a service providers' roles within an IPO. A virtual room provides a safe, secure and encrypted place to store and review documentation from the due diligence phase to the deal's conclusion.
- SEC filer: Companies used to require a financial printer to format information for submission to the SEC. These days, this information can be transmitted electronically using a special markup language. Rather than a financial printer, identify an SEC filer that will allow you to pull together, format, and submit the required information in EDGAR.
- ESG reporting specialists: Investors’ and regulators’ interest in ESG concerns has only grown over the last few years. This is why a critical element of your IPO compliance checklist should be to add experts who understand the ins and outs of ESG and can help you put your company on good footing in that regard.
- Cybersecurity experts: Data breaches are no laughing matter, and being able to project strength and security when it comes to conducting business online is very important for investors today.
- Digital marketing advisors: The right marketing expertise can help shape public perception of your organization prior to your IPO. This is why you should have someone on your team who can guide your online marketing efforts and ensure you put your best foot forward.
Take the time now to perform an IPO readiness assessment, identify gaps in your team, and seek best-fit partners.
3. Exercise Due Diligence
Due diligence is the phase of preparing for an IPO during which the company pulls together, reviews, and organizes all the information needed to file. This includes:
- Financial statements
- Balance sheets
- Income statements
- Cash flow statements
- Internal controls
- Historical accounting issues/practices
- Legal disputes
- SOX compliance
4. Draft IPO Prospectus
Using information gathered during due diligence, a company and its attorneys will develop a prospectus. Think of the prospectus as a hybrid between a company profile and a SWOT analysis. The prospectus explains the purpose, products, market strengths, overall strategy, and opportunities within the market. There are specific disclosure requirements that must be followed in the prospectus, which the attorneys will explain.
5. File an IPO Registration Statement With the SEC
The prospectus and the registration statement, IPO S-1 form, need to be filed with the SEC. The SEC has 30 days from filing to review and comment upon these documents. The company may need to revise the documentation until the SEC is satisfied before proceeding.
6. Submit Required Applications
Once the SEC signs off on the registration, the company can submit its application to be listed on a particular stock exchange. At this point, underwriters will alert FINRA — which stands for Financial Industry Regulatory Authority — of the pending IPO.
7. Pre-IPO Placement and the IPO Roadshow
Before taking the IPO on a roadshow, shopping it around to potential investors, there's something called pre-placement. In pre-placement, the investment bank will privately talk up the IPO to investors, including hedge funds and private equity funds. These players are typically likely to purchase a high volume of shares, which puts the company in an attractive position going into the roadshow.
Now onto the roadshow: This is when the company and bank promote the IPO to investors in the hopes of getting buy-in. Investors can buy shares for a more attractive price during the roadshow than once the prospective share price is announced. As with the pre-IPO placement, the more shares that are sold, the more exciting the IPO opportunity looks for traders.
8. Analyze Marketplace and Determine Stock Valuation
Finally, the initial share price for the IPO holding is announced. Factors that determine the stock valuation include market climate and roadshow and private equity interest.
9. Allocate Shares and Initialize Trading
Once the share price is set, all shares must be released to underwriters. Those who purchase shares in the roadshow or pre-placement will receive their shares now. Unsold shares will be released to the market for public trading.
10. Prepare for Post-IPO Operations
Maintaining strong investor relations is critical in your post-IPO operations. You should establish transparent, digital-first communication with your investors to make sure they always know what’s going on and build trust among them. You also should consider establishing scalable systems for real-time financial reporting and tracking to handle investor demands.
The IPO process is complex. Having a good understanding of the process from end to end via this IPO preparation checklist should help you work toward the successful IPO without missing any required deliverables. For more information about planning ahead, take a look at our blog about developing a going public exit strategy.
Equally important is identifying the right IPO solutions for your business needs. With SEC filing moving toward online-only, it's more important than ever to have a secure, encrypted filing tool for all financial reporting needs. DFIN's industry-leading IPO software has your business covered from the due diligence phase to annual reports with solutions for virtual data rooms, SEC filing and shared content management of all documentation. Explore DFIN's suite of solutions to find the right tools for your business growth.
