Recently, some high profile companies have been going public. Leading up to the big day, all kinds of people get ants in their pants because, contrary to what some of you believe, going public is AWESOME. There are roadshows, CNBC hype, and typically you get to ring a bell. Pretty sweet. Unfortunately, there are all kinds of boring details that involve securities law, GAAP, fancy-pants bankers, and technology that can trip you up along the way.
Luckily, Ernst & Young has you covered. Today, the firm issued a "To the Point" memo entitled "Leading practices for a smooth IPO registration" (free registration required). This handy-dandy guide will ensure that your IPO experience is as pleasant as possible. Some "Leading Practices" we'll call attention to:
Discuss complex or unique accounting matters with the SEC staff before submitting your initial registration statementCompanies that are uncertain about the SEC staff’s view on the application of US GAAP or IFRS in a specific fact pattern should consider formal preclearance of accounting conclusions with the Office of the Chief Accountant (e.g., revenue recognition, consolidation, debt versus equity classification).
Disclose any preliminary results or capsule information carefullyCapsule financial information (i.e., financial information such as sales or net income for a recently completed period for which financial statements are not included in the IPO registration statement) may be presented in a registration statement for the most recent interim period and the corresponding period of the prior year. While a discussion of preliminary results or estimates for the latest reporting period can be useful to investors, companies should provide the proper context for such a discussion and determine that the disclosure of such amounts is balanced. For example, a company highlighting increases in revenue also should highlight any declines in net income or other key metrics. Given the potential liabilities associated with false or misleading disclosures, companies should consider excluding financial estimates that are subject to a high risk of change.
Include your estimated price range in the filing as soon as possibleTo complete its review, the SEC staff requires a complete registration statement, including the capitalization table, dilution calculation and pro forma financial information. These disclosures are all determined using the estimated sales price range in the IPO document. The sooner the estimated sales price is included in the document, the sooner the SEC staff can fully review the document for possible comment and provide sufficient time for any concerns to be addressed.
We really don’t pay much attention to the E&Y Entrepreneur thingamajigs because, well, it’s boring. Sure, we like entrepreneurs just fine but c’mon. These guys are filthy rich and successful and E&Y gives them trophies? Is this sort of commercial circle jerk really necessary? Regardless of our personal feelings, the awards are a big deal –