IPOs (Initial Public Offerings) . . .

refer to the first registered offering of company securities to the general population of equity investors. They are registered with the Securities and Exchange Commission and with the securities commissions of the states in which the company’s securities will be offered and sold. The registration of an IPO requires the preparation of a detailed offering memorandum in a form prescribed by the SEC. According to the requirements, the offering memorandum must contain an extensive description of the company, its reasons for conducting an offering, the qualities of the securities being sold, an analysis of the risks inherent in investing in the company, and a description of how the company will utilize the proceeds of the offering. Disclosures regarding the stockholding and compensation arrangements of management and persons with significant stockholdings in the company are also required. Detailed audited financial statements must be provided too.

Conducting an initial public offering is a painstaking and time-consuming project that requires extensive due diligence by the company’s counsel, accountants, and underwriters and a serious time commitment by management before, during, and after the offering. The offering process usually takes at least three to six months to complete. Typically, these months of preparation include an extensive review of company documents, the preparation of audited financial statements, numerous due diligence meetings between company personnel and the company’s advisers, and several drafting sessions (often referred to as "all hands meetings") for the offering memorandum. The preparation also includes filings and discussions with the Securities and Exchange Commission and with state securities commissions to secure proper registration for the offering, and a "road show" during which the underwriter and company officials take their offer "on the road" to sell the company’s securities.

Although IPO schedules vary widely from company to company and are sometimes compacted or expanded to respond to the perceptions of the company’s underwriter as to the best time to sell the company’s stock, a representative IPO schedule might look something like this:

IPO Schedule

Day 1 - Organizational all hands meeting to set schedule and assign responsibilities.

Day 2 - Begin due diligence interviews and documents review. Distribute officers and directors questionnaires. Begin selection of transfer agent, printer and others. Begin preparation of offering circular by company counsel and required financial statements by the company’s outside accountants.

Day 10 - Distribute first draft of offering circular.

Day 20 - First all hands drafting session to review and revise offering circular. Second draft is re-circulated ten days later.

Day 40 - Second all hands drafting session.

Day 50 - Final all hands drafting session to make any final revisions and sign offering circular.

Day 55 - File offering circular with the Securities and Exchange Commission. Issue press release.

Day 65 - Begin road show to sell securities. Proceed with state securities registrations.

Day 90 - Receive comment letter from Securities and Exchange Commission. Prepare response or amendment to offering circular, as appropriate.

Day 100 - Determine offering price. Complete state securities filings. File amendment to offering circular if necessary.

Day 115 - Effective date, offering commences.

Day 120 - Closing. Company issues securities. Offering proceeds transfer to the company.

Of course, the schedule only outlines some of the major undertakings involved in an initial public offering. The process also involves directors’ meetings, extensive due diligence meetings, and the negotiation and execution of contracts with underwriters and others. Often, the process includes the preparation and adoption of employee stock incentive plans or substantial corporate "cleanup" to get the company’s books, records, and systems into proper order to become public. See: Blue Sky Laws, Going Public, Penny Stock, Private Placements, Public Offering, SEC (Securities and Exchange Commission), 33 Act.