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The IPO Process
Types of Companies <ul><li>LLC/LLP </li></ul><ul><ul><li>Ownership Stake </li></ul></ul><ul><ul><li>Private </li></ul></ul...
Stock <ul><li>Represents Ownership Stake in a Corporation </li></ul><ul><ul><li>If Public, Must Disclose Stakes of Over 10...
Going Public - Disadvantages <ul><li>Short Term Emphasis </li></ul><ul><li>Shareholder Information </li></ul><ul><li>Share...
Going Public - Advantages <ul><li>Raise Cash </li></ul><ul><li>Attract Seasoned Executives </li></ul><ul><li>Enhance Legit...
Going Public – Sucampo Example <ul><li>Raise Cash </li></ul><ul><ul><li>Fund Clinical Trials </li></ul></ul><ul><ul><li>Ex...
IPO Terminology <ul><li>Add-On Offering :  Issuance of Additional Shares </li></ul><ul><li>Black Book :  Pre-Prospectus Pr...
IPO Players <ul><li>Company </li></ul><ul><li>Underwriter(s) </li></ul><ul><ul><li>Shepherd the Process </li></ul></ul><ul...
IPO Timeline JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - Create Black Book - Go on Road Show -  Lockup Period - Deci...
IPO Timeline <ul><li>Decide to Go Public/Create Black Book  (6 to 8 Weeks) </li></ul><ul><li>File Prospectus/SEC Comments ...
Quiet Period/No Comment/Waiting Period <ul><li>Begins with Registration Statement Filing Date </li></ul><ul><li>Ends appro...
Shelf Registration <ul><li>Register IPO with SEC but Don’t Specify Offering Date </li></ul><ul><li>Have 2 Years to Decide ...
Initial Offering Price <ul><li>Price = Amount to be Raised/# of Shares </li></ul><ul><li>Typically Given as a Range </li><...
IPO Costs <ul><li>SEC  =  1/29 of 1% of Offering Value </li></ul><ul><li>Exchange Fees  =  Application Fee + Listing Fee (...
 
S1:  SEC Filing <ul><li>General Terms of Offering </li></ul><ul><li>Prospectus Summary </li></ul><ul><li>Risk Factors </li...
 
 
 
Use of Proceeds
Options <ul><li>Right to Buy (Call)/Sell (Put) Stock at Specific Price by a Specific Date  </li></ul><ul><li>Exercise Your...
 
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The IPO Process

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The IPO Process

  1. 1. The IPO Process
  2. 2. Types of Companies <ul><li>LLC/LLP </li></ul><ul><ul><li>Ownership Stake </li></ul></ul><ul><ul><li>Private </li></ul></ul><ul><ul><li>Limited Personal Liability </li></ul></ul><ul><ul><li>Invest $20K + </li></ul></ul><ul><li>Corporation </li></ul><ul><ul><li>Stock </li></ul></ul><ul><ul><li>Public/Private </li></ul></ul><ul><ul><li>Very Limited Personal Liability </li></ul></ul><ul><ul><li>Artificial Person </li></ul></ul>
  3. 3. Stock <ul><li>Represents Ownership Stake in a Corporation </li></ul><ul><ul><li>If Public, Must Disclose Stakes of Over 10% </li></ul></ul><ul><li>Par Value: Amount Per Share Used to Establish Accounting Value of Common Shares on Balance Sheet (Typically $1/Share) </li></ul><ul><li>Two Types </li></ul><ul><ul><li>Common (Voting Rights) </li></ul></ul><ul><ul><ul><li>Board of Directors </li></ul></ul></ul><ul><ul><ul><li>Dividends </li></ul></ul></ul><ul><ul><ul><li>Other Matters </li></ul></ul></ul><ul><ul><ul><li>[Classified Common: Class A & B Shares with A having Voting Power Advantage; Used to Preserve Minority Control] </li></ul></ul></ul><ul><ul><li>Preferred (No Voting Rights – Typically) </li></ul></ul><ul><ul><ul><li>Receive Dividends </li></ul></ul></ul><ul><ul><ul><li>First Claim on Assets in Event of Liquidation </li></ul></ul></ul>
  4. 4. Going Public - Disadvantages <ul><li>Short Term Emphasis </li></ul><ul><li>Shareholder Information </li></ul><ul><li>Shareholder Approval </li></ul>
  5. 5. Going Public - Advantages <ul><li>Raise Cash </li></ul><ul><li>Attract Seasoned Executives </li></ul><ul><li>Enhance Legitimacy/Reputation </li></ul><ul><li>Increase Publicity </li></ul><ul><li>Cash Out for Venture Capitalists/Other Investors </li></ul>
  6. 6. Going Public – Sucampo Example <ul><li>Raise Cash </li></ul><ul><ul><li>Fund Clinical Trials </li></ul></ul><ul><ul><li>Expand Sales & Marketing Capabilities </li></ul></ul><ul><li>Attract Seasoned Executives </li></ul><ul><li>Enhance Legitimacy/Reputation </li></ul><ul><li>Increase Publicity </li></ul>
  7. 7. IPO Terminology <ul><li>Add-On Offering : Issuance of Additional Shares </li></ul><ul><li>Black Book : Pre-Prospectus Prospectus, Used to Help Underwriter Value the Company </li></ul><ul><li>Blue Sky : State Laws That Require Companies to Register Offerings and Provide Corporate Financial Data to Prevent Investor Fraud </li></ul><ul><li>Greenshoe : Section of Underwriting Agreement that Defines Percent of Shares Underwriters Can Purchase (15%) </li></ul><ul><li>Prospectus/Red Herring : Document that Explains Company’s Business, Strategy, and Risks </li></ul><ul><li>Road Show : Company Tour to Attract Interest in IPO; Media Forbidden </li></ul>
  8. 8. IPO Players <ul><li>Company </li></ul><ul><li>Underwriter(s) </li></ul><ul><ul><li>Shepherd the Process </li></ul></ul><ul><ul><li>Assemble Syndicate of Investment Banks </li></ul></ul><ul><ul><li>Liaise with SEC, State Securities Organizations, Stock Exchanges </li></ul></ul><ul><ul><li>Facilitate Trading </li></ul></ul><ul><li>Syndicate of Investment Banks </li></ul><ul><ul><li>Purchase Shares </li></ul></ul><ul><ul><li>Resell to Clients </li></ul></ul><ul><li>Current & Future Shareholders </li></ul>
  9. 9. IPO Timeline JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC - Create Black Book - Go on Road Show - Lockup Period - Decide to go Public Pick IPO Team Receive Analysts’ Coverage Finalize Prospectus Establish Offering Price Finalize IPO Receive SEC Comments Develop & File Prospectus - Quiet Period
  10. 10. IPO Timeline <ul><li>Decide to Go Public/Create Black Book (6 to 8 Weeks) </li></ul><ul><li>File Prospectus/SEC Comments (1 Month) </li></ul><ul><li>Enter Quiet Period (Prospectus Filing to Analyst Coverage) </li></ul><ul><li>Road Show (1 to 2 Weeks) </li></ul><ul><li>Finalize Prospectus/Establish Offering Price (1 to 2 Weeks) </li></ul><ul><li>Issue IPO (2 Days) </li></ul><ul><li>Finalize IPO (7 Days) </li></ul><ul><li>Receive Analyst Coverage (25 Days after Issuance) </li></ul><ul><li>Enforce Lockup Period [No Insider Trading] (180 Days after Issuance) </li></ul>
  11. 11. Quiet Period/No Comment/Waiting Period <ul><li>Begins with Registration Statement Filing Date </li></ul><ul><li>Ends approximately 25 Days after Stock Begins Trading </li></ul><ul><li>Forbids “promotion” of stock offering </li></ul><ul><li>Allows “consistent” communications before and after registration statement filing </li></ul>
  12. 12. Shelf Registration <ul><li>Register IPO with SEC but Don’t Specify Offering Date </li></ul><ul><li>Have 2 Years to Decide </li></ul><ul><ul><li>Wait for Better Market Conditions </li></ul></ul><ul><ul><li>Minimize Time & Expense </li></ul></ul>
  13. 13. Initial Offering Price <ul><li>Price = Amount to be Raised/# of Shares </li></ul><ul><li>Typically Given as a Range </li></ul>
  14. 14. IPO Costs <ul><li>SEC = 1/29 of 1% of Offering Value </li></ul><ul><li>Exchange Fees = Application Fee + Listing Fee (Based on Number of Shares) + Annual Fee </li></ul><ul><li>NASD = Filing Fee (Based on Value of Offering) </li></ul><ul><li>Underwriter Fee = Offering Price – Underwriter’s Discount Price (7%) </li></ul><ul><li>Legal & Accounting Fees </li></ul><ul><li>Printing & Engraving Expenses </li></ul>
  15. 16. S1: SEC Filing <ul><li>General Terms of Offering </li></ul><ul><li>Prospectus Summary </li></ul><ul><li>Risk Factors </li></ul><ul><li>Use of Proceeds </li></ul><ul><li>Dividend Policy </li></ul><ul><li>Management Discussion & Analysis </li></ul><ul><li>Business Plan </li></ul><ul><li>Management </li></ul><ul><li>Financial Statements </li></ul><ul><li>Other </li></ul>
  16. 20. Use of Proceeds
  17. 21. Options <ul><li>Right to Buy (Call)/Sell (Put) Stock at Specific Price by a Specific Date </li></ul><ul><li>Exercise Your Option Before It Expires </li></ul><ul><li>Insider Options are Listed in S1 </li></ul>
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