At some point in their career, every small business owner dreams about taking their company public on the NYSE.
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The process for conducting an IPO isn't as complicated as it sounds. Under the right conditions, even small businesses can eventually grow into a publicly traded firm.
The road to the NYSE begins long before the IPO by establishing strong fundamentals, steady growth and an incorporated business structure. Before you decide to pursue a public option, consider whether or not you can accomplish the same goals through private capitalization. You'll lose a lot of flexibility after the IPO and if you can adequately fund the business through private investment, you should do it.
But if you decide a public offering is the way to go, expect to endure a 12 to 24 month period of preparation, frenetic activity and sleeplessness. Painted with extremely broad brush strokes, here's what the process for going public on the NYSE looks like.
- Preliminary Financial Preparation (12+ months before IPO). The year before you intend to go public should be spent restating audited financial statements to comply with GAAP and SEC rules. During this time, you will hire outside professionals who will be vital throughout the rest of the process: A securities attorney, an auditing firm and key securities advisors. These professionals will help prepare your company for the rest of the process.
- Establish timeline & draft materials. (4–12 months before IPO). Much of the year leading up to the IPO will involve a series of organizational meetings during which you will begin to draft your prospectus and required filings. At some point you will meet with the NYSE to reserve a ticker symbol, but during most of this time you will be occupied with laying the groundwork and drafting a S-1 registration statement that includes audited and interim financials.
- File first round of documents. (2–4 month before IPO). After completing underwriter due diligence, you will file your first registration statement with the SEC and submit a listing application. You will then receive and respond to the SEC's comments on your registration statement.
- Respond and update registration (1–2 months before IPO). At this point, you will participate in several rounds of responding to ongoing SEC comments about your registration statement.
- Road show (2-4 weeks before IPO). As the time of your IPO draws near, you will conduct what's called a "road show" where you will meet with prospective investors. This is also the time when you will begin to distribute your "red herring" prospectus.
- IPO. You've arrived! During the week of the IPO, your registration will be declared effective by the SEC, your stock price will be approved by your board and shares will be traded on the market.