GOING PUBLIC CONSIDERATIONS
Going public on a stock exchange requires proper planning and the proper team. Too many companies miss this step and consequently face numerous problems in the process of going public. In addition, they also face hurdles when publicly traded due to inadequate planning. Proper due diligence, acquiring the right investment dealer are some of the key tasks required to successfully go public. Therefore, assembling the right deal team is the most important step in going public. Certainly your deal team will include a Going Public Management Consultant (“GPMC”). Below are some considerations when going public.
A. Deal Team
You will need a deal team that can assist you in the financing and listing process. Therefore, members of your deal team will include:
1. Going Public Management Consultants:
Going Public Management Consultants also known as Capital Markets Management Consultants can be your in-house listing team that can assist you with:
(a) Get you the right investment dealer(s) for your financing or IPO;
(b) source out and negotiate shells for an RTO;
(c) prepare the right marketing documentation for investment dealers and shells;
(d) structure your market awareness program for your public listing;
(e) source out the right professionals such as lawyer and auditors that suit the company’s needs;
(f) assist the company in deciding the right stock exchange to list on.
(g) co-ordinate the listing and financing process for the company with the investment dealer(s), shell, if an RTO, the lawyers, auditors and stock exchange.
2. Underwriter/Investment Dealers:
If raising capital, you will need to attract an investment dealer or dealer to arrange your financing. Usually, this is a case of them picking you, so ensure your have a proper presentation that answers all of the questions they require, you only get one chance at this.
You will need counsel that is experienced in securities law as well as going public transactions and listings. In addition, make sure the lawyer is familiar with the stock exchange you intend to list on.
Audited financial statements are required to go public. Make sure the auditor you pick is familiar not only with the stock exchange you list on but are also knowledgeable with non-venture or venture issuer requirements.
5. Transfer Agents:
The company will need a transfer agent to handle your securities. For the most part they will be issued in book entry only form using CDS Clearing and Depository Services Inc.
B. Preparation For A Stock Exchange Listing
Going public can bring a level of excitement to a company that needs to be tempered as preparation is the key to a strong going public transaction. Therefore, this is the beginning and where you bring in your going public management consultant to work with you and your team.
1. Due Diligence:
It is advisable to get your due diligence organized. Your management consultant can provide you will a due diligence checklist. In particular it will cover the majority of information needed by your auditor, lawyer, and investment banker. With the due diligence checklist, mark off what documents you have and do not have. After that, upload the documents you have to a data room that can be accessible to your deal team. Keep in mind that you should concurrently work on the required documentation.
2. Comprehensive Business Plan:
The going public process requires ‘prospectus level disclosure’ that can be in the form of a prospectus, information circular, or a listing statement. Consequently, the core of this is a comprehensive business plan which will cover topics required for insertion into your ‘prospectus level disclosure’. Furthermore, a majority of the information will come from the due diligence discussed above. Again, your management consultant should be able to assist you in completing this.
With the completion of the Due Diligence and Business Plan now is the time to put together a presentation or a pitch deck for marketing your opportunity to investment dealers and shells for an RTO. Your management consultant will have the experience and knowledge on putting together the proper presentation. Ultimately this will have all of all the information that investment dealers and shells need to evaluate your company for a public listing and/or financing.
4. Financial Statements:
Prepare historical and forecasted financials which will give Investment Dealers and shells an idea of where you have been and where you expect to go. For forecasted financials, its important that you show your audience that you understand your market segment and its size as well as your cost of goods sold and your expenses.
C. Expectation Management – A Key Going Public Consideration
One of the keys to a successful listing is expectation management with your stakeholders, deal team and regulatory authorities. Therefore, mastering the art of expectation management is key to a successful stock market listing and one of the most important going public considerations.
“Anger always comes from frustrated expectations.” — Elliott Larson
Expectation management has two core features:
Do not assume that everyone knows what’s going to happen next. Communicate clearly with understandable explanations as to the process and timelines.
Expectation are based on what has happened before.
As always you want to under promise and over deliver. The best method to achieve that preparation.
Many companies in their presentation material discuss the date they will be listed on a stock market. First thing to remember is that the Securities Act in Part 13 Section 3 forbids a company from saying that they will be listed on a stock exchange without final or conditional approval. With that being said, if you have not applied to a stock exchange set the expectation that you plan on applying to an exchange at a certain date. Alternatively, if you have applied, inform people that you have, and you are waiting for conditional or final approval.
When dealing with stakeholders get a realistic understanding of your current valuation, timing to listing and your final valuation when going public on a stock exchange.
All things considered, you will need to discuss with your deal team, current shareholders, investors on your president’s list their expectation and what you can realistically achieve in the end.
In conclusion, the right deal team at the beginning can increase your success rate in having a successful stock exchange listing. Following these going public considerations will assist you in the process. Furthermore, if you would like to learn more, please fill out the form above. We will contact you to discuss creating the right deal team to go public.