It's an exciting step for your company, but if you've never been through an initial public offering before (and most people haven't), the process can be daunting. Fortunately, you don't have to go through it alone. Your first task is to assemble a team of experts – people who've been through it many times who will guide you through the process.
Experts you'll need for an IPO
Who do I call first?
For most companies, the first step is to hire an advisory firm specializing in IPOs. These large auditing/accounting firms are responsible for preparing the financial reports that will determine if and when you qualify for an IPO, and on which stock exchange.
Your advisory firm will tell you that you'll also need to bring in a legal team that specializes in securities to handle the incorporation process and prepare the S-1 filing. You will need an IPO expert to manage the details at whichever exchange you've chosen. Additionally, you will need an underwriting/investment firm to raise capital, register your security, set the price and advise you on the best time to go public.
You will also need a transfer agent to help you gather the records of any pre-IPO registered shares, prepare them for sale if applicable, escrow the IPO proceeds, process your payment and issue new shares to shareholders after the closing date.
What's a transfer agent?
A transfer agent is a financial services company that manages and keeps track of registered shareholders for companies that issue stock. EQ, for example, is a U.S.-based transfer agent that handles the recordkeeping, reporting and communications for hundreds of U.S. corporations and their millions of shareholders around the world.
After your IPO, your transfer agent remains your partner afterwards, potentially for the life of your company.
— Joe Conte, Head of Corporate Actions, EQ
Once your company goes public, your transfer agent helps you navigate the rules and regulations around securities and shareholders. As a transfer agent, we are responsible for keeping up-to-date records and handling communications with all registered shareholders, issuing new shares, dividend payments, tax reporting, SEC compliance reporting, unclaimed property reporting – the list goes on and on.
"The transfer agent you choose remains your partner after you IPO, potentially for the life of your company," says Joe Conte, Head of Corporate Actions at EQ. "Choose a transfer agent who will be a good fit for your company long after the IPO.”
An IPO can take as long as a year or two to execute, and things get busier as opening day approaches. Conte advises companies to choose a transfer agent early in the IPO process.
"It's a relatively small community," he says. "The vetting process shouldn't take that long, but you owe it to yourself and your future shareholders to do your homework."
Given the longevity of the relationship, you'll want to make sure you've found an agent that you trust to handle all your needs as your company grows. There's another benefit to choosing your transfer agent early in the process.
"We're experts when it comes to the actual transaction part of the IPO," says Conte. "We can help you avoid any issues with the filing, and make sure everybody's on the same page with the details when we’re brought in early. After all, you only get one chance to do this right."
There are hundreds of decisions that need to be made along the journey to becoming a public company. There are experts to advise you at each step along the way. Make sure you understand the value each expert brings, before, during and after your IPO.