Taking your company public is no easy feat. First, you need an initial public offering (IPO), and there’s no way into the stock exchange without it. So, where should you begin? In today’s blog, we’ll be giving you the lowdown on all the basics of IPO, as well as some tips for going public. Then, we’ll discuss how technology like data rooms can ease the IPO process.
Initial public offerings (IPO) explained
The process of an IPO involves offering shares in your company on a public exchange, allowing public investors to raise capital for that company. It’s a process that could be described as the culmination of the journey of a startup.
Wherever you are in the world, there are going to be requirements and standards to fulfil before you can hold an IPO. The regulatory bodies that set these standards vary around the globe, and so, therefore, do the requirements. In the United Kingdom, for example, the body that has the final say on whether to offer an IPO is the Listing Authority. All prospective IPO grantees go through this body.
The key to a successful IPO
The IPOs that succeed all tend to have at least one thing in common: an experienced and reliable management team. Those are the people who are going to be presenting your company’s investment case, and the company itself. If they can’t provide compelling enough reasons for your IPO, there might not be a way forward.
As well as a strong management team, you’re also going to need to put together a well thought out business plan. This plan should be scalable and well established. You need to make clear that your company is no stranger to growth, that your sector is suitably niche, and that your company is actually innovating.
The steps to securing an IPO for your startup
It’s a lengthy process. But what does that process look like? Usually the first step is enlisting the help of an investment bank or, in the case of an AIM listing, a nominated adviser (NOMAD). The bank will be in charge of the underwriting, meaning they’re essentially the middleman between your business and prospective investors. At that stage, it would be decided how much money your company is hoping to raise.
Then, the bank would draw up an IPO registration agreement, which would be passed to the Listing Authority. As we mentioned earlier, the body with the final say on IPOs will differ from country to country. For example, in the United States, it’s the Securities and Exchange Commission.
The bank would then launch an initial or pathfinder prospectus in order to draw in high-profile investors, at which point price negotiations would begin. Once a price has been agreed, the bank would sell the shares on the stock market.
How do corporate finance services aid the IPO process?
There are a number of ways in which corporate finance services can assist you with the otherwise arduous IPO process. Typesetting, printing and distributing the prospectus is one. A secure virtual data room, for example, can also be a massive help for sharing information regardless of where you are in the process – marketing presentations, research note, pathfinder prospectus or final admission document.
We live in an unpredictable world, and both you and your investors need assurance that all confidential documents will remain in the right hands. These days, corporate and investor information needs to be stored somewhere secure and with permission based access. It should be easy to use, and offer intelligent document tracking.
A leading provider of corporate finance services, Perivan is the UK’s number one producer of IPO prospectuses and investor & shareholder communications. For secure data rooms and more, check out our offerings here.