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Perspectives

A roadmap to IPO: Your guide for process and considerations

Preparing for the initial public offering process

The IPO process can be difficult to navigate. In a year marked by a global pandemic, an economic downturn, and a presidential election, an IPO guide is particularly vital. A Roadmap to Initial Public Offerings is the IPO checklist to help you address the challenges you face.

An IPO guide built for today’s obstacles

Preparing for an IPO can be a complex, time-consuming, and costly process. Companies have to address financial reporting, accounting, and auditing considerations, among other items on their IPO checklist, to prepare a registration statement and ultimately go public.

Promoting the US IPO market has been a priority for SEC Chairman Jay Clayton. On September 26, 2017, Chairman Clayton made the following statement before the US Senate Committee on Banking, Housing, and Urban Affairs:

"It is clear to me that companies that go through the US IPO process emerge as better companies, with better disclosure. We want to encourage and preserve that dynamic. Overall, the SEC will strive for efficiency in our processes to encourage more companies to consider going public, which will result in more choices for investors, job creation and a stronger US economy."

During the upcoming year, there will be increased uncertainties as a result of the COVID-19 pandemic, the economic downturn, and the 2020 presidential election. These events could have a big impact on the overall IPO market as well as on certain market sectors and individual companies. Registrants should be ready to respond to changing financial market conditions and prepared to face the challenges of undertaking an IPO.

A Roadmap to Initial Public Offerings is an IPO guide we hope you find useful as you formulate your plan.

Charting your IPO readiness roadmap

There are numerous checkpoints on the roadmap to IPO. Among the key areas covered by our 2020 IPO guide are:

Required financial statements for the registration statement: One of the more challenging aspects of preparing for an IPO is ensuring that the entity has identified the appropriate financial statements to include in the filing. There are many considerations related to determining the appropriate financial statements to include in the IPO registration statement. Before preparing the registration statement, entities are strongly advised to consult with their independent auditors and legal counsel to determine the appropriate financial statements to include.

Financial statement preparation and disclosure requirements: Certain provisions of US GAAP for public entities differ from those for nonpublic entities. Further, public entities are subject to various SEC rules and regulations that may affect the financial statements and related disclosures. Therefore, a nonpublic entity’s previously issued financial statements are generally not sufficient for an IPO and the financial statements, including carve-out financial statements, will typically need to be revised for all periods presented to reflect the public-entity accounting principles and additional SEC disclosure requirements.

Accounting matters: This section highlights common accounting issues addressed in preparing financial statements for inclusion in an IPO registration statement. While some of the guidance may be directly applicable, some of it may be applied to IPO registration statements by analogy, may be complex, and may require significant judgment. Understanding the structure and substance of the transactions to effect the IPO is critical to making sound and reasonable judgments. During its comment process, the SEC staff will frequently ask management to explain those judgments, alternatives considered, and why the information provided to the user is representationally faithful.

Why navigating the IPO roadmap may be worth the effort

As evidence of its commitment to promoting the US IPO market, the SEC released a final rule that became effective on December 3, 2019, and that expands the “test-the-waters” accommodation and allows all prospective issuers to gauge market interest in a possible IPO by permitting discussions with certain investors before the filing of a registration statement. Previously, the test-the-waters accommodation was only available to emerging growth companies (EGCs). In a public statement on the final rule, SEC Chairman Clayton indicated the following:

"The Commission’s new rule expands “testing-the-waters” to all issuers, and will encourage more issuers to consider entering our public equity markets. Issuers will be able to determine, either prior to or following the filing of a registration statement, whether potential institutional investors might have an interest in a contemplated registered offering. This benefits all investors—as a result of these communications, issuers can better identify information that is important to investors and enhance the ability to conduct a successful registered offering, ultimately providing both Main Street and institutional investors with more opportunities to invest in public companies that, in turn, provide ongoing disclosures to their investors."

In addition, as part of its disclosure effectiveness initiative, the SEC has been exploring ways to make going public in the US markets more attractive while still protecting investors.

These measures may pave the way to an improved IPO process. But complexity remains. The right IPO guide can help make navigating your IPO roadmap as smooth as possible.

We leverage our network to strengthen yours as we help to prepare your company in advance of your IPO. Contact us to learn more.

 
 
 
 
 
 
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The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

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