Category Archives: IPO

VIDEO: What makes a company a strong IPO candidate

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As you’ll hear from our experts, the decision to go public, whether traditional IPO or mini-IPO, is a mosaic of many factors:

Business

  • —Does the business provide a unique service or product that doesn’t have direct competitors?
  • —If the business has publicly traded competitors, what makes it unique?
  • Cost structure (e.g. more efficient manufacturing, differentiated geographic footprint)?

Size / Scale

  • —Does the company currently have size and scale?
  • If no, is there an opportunity and plan to reach a sufficient size to be meaningful for institutional investors?

Rational

  • —Use of proceeds
  • —Additional capital required to grow
  • —Employee recruitment and retention

Company Readiness

  • —Adequacy of internal financial reporting and accounting controls (Sarbanes-Oxley)
  • —Short-term and long-term business outlook
  • —Financial performance trends and metrics for valuation
  • Predictability of operations and confidence in projections

Management Readiness

  • —Quality and depth of management team
  • —Public company experience
  • —Performance expectations

Successful IPOs can make founders, owners and senior executives millionaires overnight, at least on a spread sheet. Equally, millions of equity financing can also be raised overnight—dollars that will be essential for fueling growth initiatives: new products, expanded markets, employee hires, research and development and acquisitions

If you enjoyed the brief snippet, listen to the complete webinar HERE.

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Ping-ponging with the SEC as the IPO optimism pipeline grows

This past week, we’ve seen some positive pundit-isms towards what has been a sad year for IPOs.

Kathleen Smith, a principal at IPO-focused Renaissance Capital, expects a uptick the remaining of the year, but doesn’t expect 2016 to match the 170 IPOs and $30 billion raised in 2015, which itself was down from the 2014’s big IPO year.

“The enemy of a healthy IPO market is uncertainty and volatility. We’ve had some high volatility in the past year, but that’s moderated back down to normal levels.”

The IPO window is ready to open, “it’s just a matter of when,” said Garvis Toler, global head of capital markets at the New York Stock Exchange. “The enemy of a healthy IPO market is uncertainty and volatility. We’ve had some high volatility in the past year, but that’s moderated back down to normal levels. People need to perceive that it’s a hospitable environment.”

Liz Myers, JPMorgan’s global head of equity capital markets, reported that JPMorgan has 20+ IPOs in their global pipeline in September, and a “full pipeline” for the balance of 2017. Additionally, JP Morgan expects to see more than a dozen tech IPOs before the end of the year. Venture capitalists count more than 150 unicorns (privately held companies valued above $1 billion) in the US. IPOs bring big gains to VC firms and other early investors, allowing them to invest in the next star companies.

What do companies, especially Emerging Growth Companies, do as they prepare for their IPO?

Well… they prepare. One place to start is to understand the actual drafting registration process you’ll experience with the SEC. THIS WHITEPAPER ILLUSTRATES THAT PROCESS.

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What you’ll see illustrated in the whitepaper is that the SEC will absolutely PONG back your PING, looking for sharper definition on one, some or all (eek!) of these topics:

  • Acquisitions
  • Contingencies
  • Divestitures
  • Estimates
  • Fair value
  • Goodwill impairment
  • Income taxes
  • Internal controls
  • MD&A
  • Non-GAAP abuse / reconciliation
  • Segment reporting
  • Stock compensation

As your securities lawyers will clearly express, “don’t take it personally.” SEC letters are a part of the process and the back-and-forth can take months, with an average of 8 months.

Lastly, although it is a bit of a ping pong match, its NOT a competition. The SEC wants companies to succeed while simultaneously protecting investors.

 

Experts for corporate exit execution

As of last week, in 2016, only 55 companies have rung the IPO bell on Wall Street (or in Times Square). This is 45%, YOY, of 2015 and 30%, YOY, of 2014. The money raised is the same percentages.

So, with such dramatic reductions in S-1 filings, what has kept our Capital Markets Operations Team so busy? Mergers.

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2016’s domestic M&A, although down one-fourth from last years’ tremendous activity, has kept our transactions pros working all three shifts.** SEC form S-4 can be as complicated as an IPO’s S-1 and, absolutely, the production precision needed is equal.

Prior the S-4, our team is onboarding and training the appropriate working groups to manage their virtual data room (VIEW DEMO VIDEO) – assuring the right content gets into the right folders and that the wrongs eyes don’t have access. Security and administrative permissioning is paramount.

Why are companies exiting via M&A rather than an IPO? The Wall Street Journal states several factors, including the soft market performance of many IPOs, buyers’ appetite for great targets and, notably, the underlying patience of Private Equity.

From the WSJ:

“Trader Corp., an online automotive marketplace owned by private-equity firm Apax Partners, was days away from publicly unveiling its IPO plans in early July when it announced a deal to sell itself to Thoma Bravo LLC for about $1.2 billion, according to several people close to the deal. The move surprised many of the company’s IPO bankers, who expected the company to fetch a higher valuation in a public offering, according to people familiar with the matter.”

Regardless of a company’s individual exit strategy, we’re pleased so many are allowing us to help them execute their plan.


**NOTE: By operating three shifts – typesetting, EDGARizing, production – we mitigate rush charges to clients. We KNOW filings are always on deadline. It’s the nature of the business. Charging “rush” charges rarely makes sense.

IPOs slower to price regardless of fewer SEC comments in S-1 registration workflow

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Click to download the S-! workflow whitepaper

Nothing is more certain than death, taxes and comments back from the SEC on your S-1 registration’s first draft.

It’s part of the vetting process that protects investors from, on the light-side of the spectrum, overly enthusiastic corporate projections and on the dark-side… straight up fraudulent disclosures.

To view an illustration of the process, download this whitepaper.

Comments generally fall into these eight categories:

  • Back-up (third party) verification
  • Cheap stock
  • Executive compensation and executive employment agreements
  • Financial & accounting
  • Market positioning claims
  • Non-GAAP financial measures
  • Revenue recognition
  • Segment reporting

As you see in the chart below, with data from Proskauer’s 2016 IPO Study, the lowest number of SEC comments received in a first round comment letter was 11, the average was 31 and the highest was 78. One point is clear when you juxtapose the different sectors: financial services companies received the highest number of comments. Click image to enlarge.

IPO-comments

All sectors did have fewer overall comments from previous years, which (hopefully) indicates their internal diligence is steadily improving – although the pace from initial filing to final pricing is 20% slower. Market conditions are assumed the cause. Slow and steady wins (raises) the race (capital).

Should I stay or IPO now? (In 2016, it could depend on your sector)

When planning an IPO, proper timing and pricing are perhaps the most important decisions to be made. However, with volatile markets, interest rate increases and an ongoing economic recovery, significant questions exist about whether the current environment is conducive to going public. The answer is that at any time, IPOs in some sectors are more likely to succeed than others due to a combination of factors.

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In 2015, 173 U.S. companies held IPOs and their stocks are trading at an average of 5% below their IPO price. This suggests that investors – especially large, institutional investors – don’t have a strong appetite for IPOs at this time. Furthermore, the Federal Reserve’s recent interest rate hike may affect the immediate demand for IPOs.

But the fact is, a company’s prospects will vary depending on the market conditions in its specific industry. Consider ttechnology and healthcare…

A PwC report on Q3 U.S. technology IPOs found the market was quiet. The two U.S. tech IPOs in Q3 were worth $168 million – a sharp drop from the same period last year, when the equivelent number brought in $524 million. Certainly, several tech startups that had been planning IPOs recently decided the timing wasn’t right and dropped their plans to go public, citing poor or unstable market conditions that wouldn’t support the share valuations they felt their companies deserved. Many others that have gone ahead with their plans are pricing shares at the lower end of their projected ranges.

It’s worth noting, however, that the prospect of a lower share prices shouldn’t necessarily scupper plans for an IPO. Online payment startup Square, for example, recently decided to proceed with its listing despite drastically cutting its share price to $9 – an amount that valued the company billions of dollars lower than what private investors estimated only last year. However, on the day it went public, Square’s stocks jumped by 45%, demonstrating that investors could simply be skeptical of the potential overvaluation of tech companies, rather than of market conditions in general.

In comparison, the healthcare sector is experiencing a boom of IPO activity. Health care accounted for more than half of the U.S. IPOs in Q3 and has been by far the most popular sector for deals each quarter for more than a year. The sector even traded slightly up during Q3 – posting a 2% return on average – making it a relative bright spot compared to the overall negative trend in 2015.

Ultimately, investor confidence will be the largest determining factor in the strength of the IPO market in the months ahead. While stronger economic fundamentals and more stable markets are expected for the 2016, companies would be well-advised to focus on sector-specific conditions, rather than the overall market, when determining the ideal time to go public.

Companies need to understand the dark side of an IPO (video)

Successful IPOs can make founders, owners and senior executives millionaires overnight, at least on a spread sheet. Equally, millions of equity financing can also be raised overnight—dollars that will be essential for fueling growth initiatives: new products, expanded markets, employee hires, research and development and acquisitions.

That’s the optimistic side. The pessimist view on an IPO is important to discuss as well – not to derail any aspirations you may have, but to help your teams be prepared for the dramatic change a private company will experience.

  1. Higher costs
  2. Less control
  3. Pressure to meet third-party expectations
  4. No “privacy”

Our Bloomberg BNA / Vintage video discusses ALL aspects of an IPO – tapping in the expertise of Barclays, PwC, Baker & McKenzie and our president, Liam Power.

If you enjoyed the brief snippet above, listen to the complete webinar HERE.

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Global influences may redefine “testing the waters” for 2016

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Storm clouds in overseas markets are dampening a heightened optimism for IPO pipelines in developed markets, and “testing the waters” bring different imagery to mind that THIS blog illustrated.  While investor confidence will ultimately determine the pace and growth of IPO activity in 2016, a recent EY report –  Global IPO Trends – points to some key factors:

  • Low interest rates and quantitative easing by the European Central Bank and Japan mean that liquidity remains abundant
  • Lower oil prices are a boost to economic growth
  • The lower gold price suggests market confidence despite the increased volatility

Certain sectors may experience rougher conditions in the near term, as PwC capital markets partner Howard Friedman and Bloomberg’s Alex Barinka warn of a U.S. market selloff affecting biotech IPOs, for instance. Overall, however, an uptick in U.S. high-frequency indicators such as employment, retail sales and exports, paired with low oil prices, an expanding GDP, and healthy consumer spending all provide a positive backdrop for IPO confidence. As 2015 drew to an end, the Fed finally provided insight into its plans for interest rates, raising rates in December for the first time in nearly a decade.

Although the liftoff has begun, its rate hike path is expected to be slow and gradual, which should remove some level of uncertainty from markets. Additionally, analysis by law firm Morrison Foerster points to the JOBS Act, and its “test the waters” provisions, as a further incentive for U.S. companies to explore an IPO option, especially those with smaller revenues.

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Support from Vintage no matter the path

Companies themselves are investigating financing options beyond an IPO — like M&As – and exploring all potential exchanges in an effort to optimize strategic options, which is a prevalent trend among tech companies. A continuation of the market volatility seen during the fall of 2015 would impact the length of time an IPO window is open, requiring that companies looking to float have a compelling equity story in place – one well-suited to their regional presence and their industry – and the ability to jump into the market swiftly if necessary.

Overall, there is a level of optimism for the 2016 IPO market, driven by increased confidence among investors and market players and the ability for companies to file confidentially under the JOBS Act.

IPO outlook defies global headwinds: offers a window of opportunity for 2016

BWO_028RA look at EY’s Global IPO Trends for Q4 2015 gives a glimpse into the IPO pipeline for 2016, and despite a more uncertain outlook for global markets and some cautionary tales, the U.S. IPO market is poised for growth in deals and overall proceeds.

IPO activity in 2015 was more subdued than the banner year that was 2014. EY tracked 173 U.S. IPOs during the year, down 41% from 2014, and capital raised was down 65% at $33 billion – a downward trend that was also seen globally. Considering 2014 was the most active year since 2000, this slowdown in activity does not come as a surprise to most, and the lower number of IPOs for 2015 was only 5% below the 10-year median annual IPO deal level of 183 IPOs.

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This sudden free fall in deal activity can be attributed to increased market volatility due to concerns over Greece and the euro zone, slowed growth in China, and uncertainty present throughout the year regarding the timing of the Fed’s long-anticipated interest rate hike. Other factors included the greater gamut of financing options available to companies, such as private markets and M&A, which was made evident by the strong M&A market in 2015.

Our recent webinar with Bloomberg (video) discusses how to take advantage of this window and plan your 2016 IPO… or exit. WATCH HERE.

Are you REALLY ready to go public? (webinar audio snippet)

Scott Skidmore, Managing Director – Equity Capital Markets at Barclay’s Capital kicked off our “Going Public: A How-to Guide for Making an Initial Public Offering” webinar with Bloomberg BNA, PwC, Baker & McKenzie and Barclays.

In this quick snippet, Scott answered the first core question: Should I take my company public?

Click expand arrows, lower right, to view.

The entire webinar and downloadable slides are available here: http://e.prnewswire.com/how-to-IPO-w-bloomberg.html

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WEBINAR DESCRIPTION

A company can decide to go public at any time; however, this is a complicated process which requires taking various factors into consideration and has a multitude of implications.

Gain an understanding from legal, accounting, and banking perspectives in this “how-to” guide discussing considerations for U.S. companies such as: 1) at what point should a company consider the IPO route; 2) what should be in place before turning to this strategy?; 3) who are the key players in this process?; 4) what considerations should be made when choosing IPO partners?; 5) what steps need to be followed to get the stock listed?; 6) what alternative options exist?; 7) what happens after the IPO?; and, 8) what if the IPO does not go as planned?

“How-to IPO” webinar with Bloomberg BNA, PwC, Baker & McKenzie, Barclays and Vintage

JOIN US FOR THIS SPECIAL CLE CREDIT WEBINAR

Going Public: A How-to Guide for Making an Initial Public Offering

A company can decide to go public at any time; however, this is a complicated process which requires taking various factors into consideration and has a multitude of implications.

Gain an understanding from legal, accounting, and banking perspectives in this “how-to” guide discussing considerations for U.S. companies such as: 1) at what point should a company consider the IPO route; 2) what should be in place before turning to this strategy?; 3) who are the key players in this process?; 4) what considerations should be made when choosing IPO partners?; 5) what steps need to be followed to get the stock listed?; 6) what alternative options exist?; 7) what happens after the IPO?; and, 8) what if the IPO does not go as planned?

Our presenting experts:

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DATE: December 3, 2015
TIME: 1:00 PM ET
PRE- REGISTRATION: CLICK HERE
LENGTH: 60 minutes

COST: Free

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Pre-registration is recommended to save time on event day.
You MUST attend live to receive CLE credit.


Who would benefit most from attending this program? In-house counsel; executive officers; attorneys advising companies of all sizes.

Educational Objectives:

  • The factors to take into consideration when contemplating making an IPO

  • The steps a company should take to properly make an IPO

  • What happens after an IPO, including if the IPO does not go as plannedT



MIKE GOULD, PARTNER, DEALS – CAPITAL MARKETS AND ACCOUNTING ADVISORY SERVICES, PRICEWATERHOUSECOOPERS

Mr. Mike Gould is a Capital Markets partner at PwC with twenty-five years of experience providing accounting, financial reporting and advisory services, while based in the United States, South Korea, and the United Kingdom. Mr. Gould leads the Public Offerings services practice in the US, where he helps his clients access the debt and equity capital markets in the U.S., by providing them with technical and project management advice on accounting and financial reporting issues associated with the SEC registration process, Initial Public Offerings (“IPO’s”), 144a debt and equity offerings, divestitures and carve-outs, and conversions to and from IFRS and U.S. GAAP

MARC PAUL, PARTNER & CHAIR OF THE NORTH AMERICA CORPORATE & SECURITIES PRACTICE GROUP, BAKER & MCKENZIE

Mr. Paul’s practice – both internationally and domestically – focuses on public and private securities transactions, mergers and acquisitions, private equity and venture capital transactions, and spinoffs and corporate reorganizations. He has represented issuers, investment banks, private equity funds, financial institutions and multilateral agencies in transactions throughout the United States, Latin America, Europe, the Middle East and Asia. Additionally, Mr. Paul acts as outside general counsel to numerous business entities – from large multinational corporations to domestic start-up companies.

SCOTT SKIDMORE, MANAGING DIRECTOR, EQUITY CAPITAL MARKETS, BARCLAYS CAPITAL

Scott Skidmore is a Managing Director and is responsible for the Industrial, Real Estate, Gaming & Lodging Equity Capital Origination effort at Barclays. In addition, he currently serves as Chairperson for GAC (Global Advisory Committee). This committee gathers suggestions from junior bankers and implements solutions to enhance the junior banker experience.

LIAM POWER, PRESIDENT, THE VINTAGE GROUP

Mr.Liam Power joined PR Newswire in 2011 as President of Vintage, PR Newswire’s capital markets, corporate service and institutional & funds services division. Mr.Power has full P&L responsibility for Vintage, where he leads all aspects of strategy and operations as well as also sits on PR Newswire’s executive committee. Under Mr. Power’s guidance, Vintage has become a top three provider of solutions that help companies before during and after their IPO.


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Pre-registration is recommended to save time on event day.
You MUST attend live to receive CLE credit.