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Registering Your Initial Public Offering with the SEC

FinanceLegacy

Many business owners view an initial public offering (IPO) as the brass ring. They work tirelessly to create value in their company with the eventual goal of going public. But as much work as building a company is, preparing for the IPO is hard work, too. Securities offerings are highly regulated by the Securities and Exchange Commission (SEC). Unless you qualify for one of the SEC's exemptions, you will need to file an astounding amount of paperwork before your IPO. You may also be required to file annual updates with the SEC.

Your first step will be to file a registration statement with the SEC. There are two main components of the registration statement:

Part 1: The prospectus. This part of the statement will include all the pertinent facts about your business and the offering, including financial statements, information about the management team, and other pertinent information. You must make the prospectus available to anyone who is willing and able to participate in the IPO.

Part 2: Additional information. This will include information not listed in the prospectus, including expenses of issuance and distribution, indemnification of directors and officers, recent sales of unregistered securities, and other information. While you don't need to make this information available to prospective investors, determined individuals will be able to find it in the Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) database on the SEC Web site, www.sec.gov.

Luckily, the SEC makes it relatively easy for you to file your registration statement. Form S-1 sets out all the information you must submit to begin the registration process. You can also complete the entire registration process online, with the SEC's EDGAR system. While filing online with EDGAR may be convenient, it is far from simple. Your best bet is to download the EDGAR manual in Microsoft Word format. The manual describes, in mind-numbing detail, exactly how to submit your registration "paperwork" via EDGAR.

There is no set time frame for the SEC to respond to your submission, but it does state that it will work with submitters to meet their filing goals. Bear in mind, though, that there may be several rounds of back-and-forth between you and the SEC, as clarifications and corrections are requested and made. The SEC makes no guarantees about when — or even if — your submission will be approved.

Depending on the size of your company, you may also be required to file occasional reports with the SEC after the end of the first fiscal year in which your Securities Act registration becomes effective. In fact, private companies that meet certain criteria are required to file with the SEC regardless of their IPO status. You will be required to provide these updates unless:

  • Your company has fewer than 300 shareholders of the class of securities offered, or;
  • Your company has fewer than 500 shareholders of the class of securities offered and more than $10 million in total assets for each of its last three fiscal years.

Once a private company exceeds either of these thresholds, it is required by the SEC to file public documents of its activities. Therefore once private companies reach those marks, they typically go public anyway due to the administrative headache of being private but filing publicly.