Excerpt from the Growth Company Guide 4.0
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The Going Public Process

Here is a brief summary of the events involved in taking a company public:

Organizational Preparation. Before jumping into a full scale going public effort, management needs to review the company’s organizational structure and make changes that anticipate the requirements imposed on public companies. Internal reporting systems need to be reviewed and possibly enhanced. The board frequently needs to be reconfigured to anticipate independence requirements and committee structures imposed by current securities laws and listing requirements of stock exchanges.

Selection of Underwriters. Once a decision to go public has been made, company management interviews several underwriters to evaluate their company and discuss the possibility of representing the company in the offering. Interested underwriters meet with company management and investigate the company's business and prospects for conducting a successful offering. Those who remain interested after their investigations, submit proposals to management and the going public process begins. Most underwriters will provide a preliminary estimation of the potential range of price and size of offering for the company. The size of offering and the price at which shares are offered are usually not finally determined until later in the process, so additional pricing discussions will follow.

Offering Document Preparation. Applicable securities laws require a detailed registration statement to be prepared, filed and approved by the Securities Exchange Commission before company securities are offered for sale. The preparation of this document requires an intense and coordinated effort by management, the company's lead underwriters, company and underwriter legal counsel, the company's accountants and a company selected financial printer. The completed registration statement must provide accurate disclosure of material information about the company that will enable potential investors to make informed decisions about whether to purchase company securities. The Securities Exchange Commission's role in the process is to review the submitted registration statement of the company to see whether the company has complied with federal securities laws and provided adequate information about the company. The Securities Exchange Commission does not evaluate the merit of the company's offering.

The preparation of the registration statement is typically the most time-consuming step in the going public process. Preparation typically begins with an "all-hands" meeting of company management, underwriter and underwriter counsel representatives, company counsel and accountants. A drafting schedule is agreed and responsibilities assigned to get the process rolling. Typically, company counsel, in cooperation with company management, undertake to prepare a first draft offering statement which other team members will review and revise. Several "all-hands" meetings follow where schedules are refined and the offering document is reviewed in the group and revisions are made.

Registration Statement Filing. The completed preliminary registration statement is then filed with the Securities Exchange Commission. This registration statement contains a booklet (called the preliminary prospectus) that describes the company and it’s offering. This prospectus is used as a selling document. During the waiting period between the filing and approval of the registration statement by the Securities Exchange Commission, the company and the underwriters may distribute copies of the preliminary prospectus that bear "red herring" legends. This legend declares that the offering's registration has not yet become effective and that the securities may not be sold, nor may offers to buy be accepted, until the offering becomes effective.

Sales Efforts. Most underwriters begin marketing the company's securities once the "red herring" prospectus becomes available. Once the registration statement is filed, the managing underwriters usually distribute the "red herrings" to clients and orally solicit indications of interest in the securities. A tour, or "road show," of company managers coordinates with this effort by making management presentations to underwriters, analysts and investors around the country.

Registration Approval. While this marketing effort is taking place, the Securities Exchange Commission reviews the company's registration statement and responds, typically within 30 to 40 days, with comments and requests for additional information.

Final Negotiations and Filing. Concurrently with completion of the registration process, the company and the underwriters complete their negotiations and the number of shares and offering price are set. After the registration statement is modified to address the Securities Exchange Commission's concerns and to include the price and number of shares offered, the Commission declares the registration statement to be effective and the final prospectus is printed. The underwriters send this final prospectus to their customers along with the confirmation of sale.

Closing. The closing of the offering is held after the registration is effective and the sales are confirmed. The company's securities are delivered to the underwriters for distribution and the proceeds from the sale of stock are paid to the company. The closing usually occurs within five days after the registration statement becomes effective.