How to Take a Company Public: Step-by-Step
How to Take a Company Public: Step-by-Step
The complete journey from private to public company.
Why Companies Go Public
Three reasons: raise primary capital, provide liquidity to early holders, and create public stock for M&A and talent. The trade-off is disclosure, quarterly earnings pressure, and governance costs.
Phase 1: Internal Preparation (Month -12 to -6)
- PCAOB Audits: 2 years of balance sheets, 3 years of income statements. Not AICPA — must be PCAOB.
- Board Build: Majority independent, audit committee financial expert, compensation committee.
- Controls: SOX-like internal controls, close process, ERP upgrade.
- Cap Table Cleanup: Convert preferred, exercise issues, 409A compliance.
Phase 2: Mandating Underwriters
Companies run a bake-off. 3-6 banks pitch. Lead Left bookrunner gets ~60% of economics. Gross spread is 7% for sub-$150M IPOs, 3-5% for large caps.
Phase 3: Drafting S-1 and Due Diligence
8-12 week drafting with lawyers, auditors, ECM. Banks establish due diligence defense for Section 11 liability. Can file confidentially if revenue < $1.235B under JOBS Act.
Phase 4: SEC Review
SEC issues comment letters on revenue recognition, non-GAAP metrics, risks. Company files S-1/A amendments until cleared.
Phase 5: Roadshow and Bookbuilding
7-10 days, 60-100 meetings. Book of demand drives price.
Phase 6: Pricing and IPO Day
Price night before, allocate, list on NYSE/Nasdaq, opening auction, stabilization. Lock-up begins.
