Organizing and Managing the Activities for Completion of an Initial Public Offering

One of the most challenging tasks for any securities lawyer is organizing and managing all of the activities that need to be completed in order for a company to achieve its highly desire goal of “going public”.  The first step in this process should be an organizational meeting that brings together all of the necessary participants in the process—representatives of the issuer and the underwriters, counsel for the issuer and the underwriters, the accountants and the financial printer.  A typical agenda for an organizational meeting will address a number of possible items, depending upon the time available and the degree of preparation to date.  Special note will be taken of the following points:

  • The timing of the offering, anticipated size and offering price, and the degree of participation of selling shareholders;
  • The schedule for the remaining drafting and due diligence sessions and the responsibilities of each of the participants for various portions of the registration statement;
  • Pre-filing modifications to the company’s capital structure and other corporate arrangements that may be necessary to properly price the offering and to eliminate potential Blue Sky concerns;
  • Substantive disclosure items to be addressed in the registration statement drafting process, including litigation, insider transactions, potential acquisitions, new products, and any other major developments with respect to the competitive environment of the company that may influence the timing of the offering;
  • The timing of receipt of appropriate financial statements for filing as part of the registration statement, and any accounting issues relating to off-balance sheet financing or recent acquisitions of other businesses for which audited financial statements will need to be prepared; and
  • The desirability of reincorporating in a jurisdiction that provides officers and directors with the greatest amount of personal protection from liability to the shareholders for monetary damages for breaches of their duty of care.

The managing underwriter and its counsel should also prepare a timetable and list of responsibilities for distribution to all of the parties at the organizational meeting. This document sets forth a schedule for the basic steps in the registration process.  It fixes key deadlines, which often turn on the assumptions of the company and the managing underwriter regarding the proper timing for the offering.  A separate document circulated with the timetable will assign responsibility for completion of particular tasks, and facilitate the requisite coordination. Experience has shown that listing each of the important items is far more important than settling upon an exact timetable, since it is often difficult to predict each of the items with absolute certainty.

Among the important milestones which should be established in the initial timetable are the following:

  • The availability of the initial draft of the registration statement, including any required financial information;
  • The scheduling of meetings with officers and key employees of the company;
  • Board and shareholder actions regarding any housekeeping matters and approval of the offering;
  • Filing of the registration statement with the SEC and the other regulators and the anticipated period of review;
  • Scheduling of post-filing marketing activities, including the "roadshow" presentations;
  • Preparation and filing of any anticipated material amendments to the registration statement which may be required in order to address comments from the SEC and the other regulators;
  • Effectiveness of the registration statement, execution of the underwriting agreement and commencement of the sale of the offered securities; and
  • Closing of the sale and purchase of the offered securities.

Traditionally the participants waited until the completion of the organizational meeting to begin drafting the registration statement and did not circulate the first draft of the registration statement until 10 to 14 days after the organizational meeting.  In addition, the “roadshow” presentations were held during the waiting period after the registration was filed and before comments were received from the SEC.  However, a slightly different approach is now often taken that would lead to important changes in the sequence of events in the timetable.  For example, the participants frequently begin serious preparation of the registration statement several weeks before the organizational meeting and wait until the SEC has cleared all of the company’s responses to their comments before launching the “roadshow.”    It should also be recognized that the period required to complete all of the activities described in the timetable will vary depending on a number of factors, some of which are out of the control of the participants.  For example, the participants may decide to proceed at a more leisurely pace in drafting the registration statement if they believe it may be necessary to wait until market conditions are suitable for the offering to proceed and be accepted strongly by investors. Delays may also be caused by regulators who are unable to review the documents due to a high volume of other activities.

The content in this post has been adapted from material that will appear in Business Counsel Update (April 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

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