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Going Public

Going Public. Chapter 16. Going Public. What does it mean to “go public”? Initial Public Offering. Advantages. Obtaining New Equity Capital Enhanced Ability to Borrow Enhanced Ability to Increase Equity Liquidity & Valuation Prestige ad Personal Wealth. Disadvantages.

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Going Public

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  1. Going Public Chapter 16

  2. Going Public • What does it mean to “go public”? • Initial Public Offering

  3. Advantages • Obtaining New Equity Capital • Enhanced Ability to Borrow • Enhanced Ability to Increase Equity • Liquidity & Valuation • Prestige ad Personal Wealth

  4. Disadvantages • Potential Loss of Control • Public Exposure • Money and Time • Sarbanes-Oxley • Costs

  5. Costs of Going Public • Average cost= $500,000 • SEC Reports • Accounting fees • Legal fees • Underwriter • Underwriter’s discount • SEC fees- .02% • NASD fees- .01% • Printing costs

  6. Alternatives to Going Public • Private Placement of Securities • Restrictive covenants • Liquidation covenants • Bank loans • Drawbacks

  7. Timing of Going Public • Is Company Large Enough? • What is Amount of Earnings and Strength of Financial Performance? • What are the Market Conditions? • How Urgent is the Need for Money? • What are the Needs and Desires of Owners?

  8. Underwriter Selection • Start the “Process” • Select Managing Underwriter • Will develop a syndicate • Mutual contact/referrals • What should you look for? • Reputation • Experience • Cost • Distribution Capacity • Advisory Services

  9. Registration Statement & Cost • Next Step= Planning Meeting • Length of time for registration process • Common hold-ups • Registration Statement • Prospectus • Registration statement • Securities & Exchange Act • Form S-1

  10. The Prospectus • Cover Page • Preliminary • Final • Table of Contents and Executive Summary • Introduction • Risk Factors • Use of Proceeds • Dividend Policy

  11. The Prospectus • Capitalization • Dilution • Financial Data • Business • Management & Owners • Capital Stock • Underwriter Information • Actual Financial Statements

  12. Prodcedure • Red Herring • Comment Letter • Pricing Amendment

  13. Other Issues • Legal Issues • Quiet period • Length • Why? • Blue-sky Qualifications • State laws • Effects

  14. After Going Public • Aftermarket Support • Relationship with Financial Community • Reporting Requirements • 10-Q • 8-K • Sarbanes-Oxley • Proxy Solicitations

  15. Myths • In this market, high-tech is the name of the game • If you’re doing OK, don’t worry about the aftermarket • The analysts will follow you through think and thin • The young entrepreneurial companies will continue to get the spotlight this year

  16. Myths • You need to be profitable to get a high valuation in this market • Of course, you want to be the next Netscape • During your IPO, you’re the center of attention • Somebody knows where the IPO market is headed

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