Mais conteúdo relacionado Semelhante a IPO Readiness (20) IPO Readiness2. Contents
IPO Process (slides 3-6)
Impact of JOBS Act (slides 7-18)
Quiet Period (slides 19-24)
Management (slide 25)
Board of Directors (slides 26-40)
Corporate Governance (slides 41-49)
Corporate and Capital Structure (slides 50-54)
Equity Incentives (slides 55-56)
Financial and Audit Matters (slides 57-58)
Getting Started (slides 59-66)
SEC Review (slides 67-74)
Life as a Public Company (slide 75)
For More Information (slide 76)
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3. IPO Process
Begin corporate housekeeping and IPO preparations
Pick underwriters and assemble team
Enter “quiet period”
Org meeting
Underwriter due diligence (ongoing)
Prepare and file Form S-1
Clear SEC comments
Road show
Price IPO and sign Underwriting Agreement
Closing
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5. IPO Process
Overall Timeline
Preparation should begin 3-6 months before org meeting
Generally 4-6 weeks from org meeting to filing (assumes
strong draft of “Business” section circulated prior to org
meeting)
Filing to closing requires 3-4 months
But all subject to company readiness, SEC review process,
market conditions and numerous other factors
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7. Impact of JOBS Act
JOBS Act enacted on April 5, 2012
Intended to spur job creation and economic growth by
improving access to the capital markets for startup and
emerging growth companies
Many provisions potentially of interest to pre-IPO companies
and recent IPO companies
Provisions applicable to IPOs are immediately in effect
All provisions, except crowdfunding, available to foreign
issuers
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8. Impact of JOBS Act
“Emerging Growth Company”
An "emerging growth company" (EGC) is any issuer that had
total gross revenues of less than $1 billion during its most
recently completed fiscal year, other than an issuer that
completed its IPO on or before December 8, 2011
Note that EGC status is available to companies that went
public after December 8, 2011
EGCs have up to five years following an IPO to come into full
compliance with certain disclosure regulations and accounting
and auditing standards that are otherwise applicable to all
U.S. public companies
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9. Impact of JOBS Act
Termination of EGC Status
A company that is an EGC on the first day of its fiscal year will
no longer qualify as an EGC upon the earliest of
– the last day of the fiscal year during which it had total annual
gross revenues of $1 billion (indexed for inflation),
– the last day of its fiscal year following the fifth anniversary of the
first sale of its common equity securities in a public offering,
– the date on which it has, during the previous three-year period,
issued more than $1 billion in non-convertible debt, or
– the date on which it becomes a "large accelerated filer" (a
company that has been public for at least twelve months, has
filed one Form 10-K and has a public float of at least $700 million)
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10. Impact of JOBS Act
Reduced Financial Statement and MD&A
Requirements
EGCs are required to provide audited financial statements for
only two years (instead of three)
Maximum time period for separate financial statements of
acquired business is also two years
EGCs need not present selected financial data for any period
prior to the earliest audited period
An EGC’s MD&A must cover only the fiscal periods presented
in the required financial statements
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11. Impact of JOBS Act
Exemptions from Audit and Accounting
Requirements
EGCs are not required to obtain audits of their internal control
over financial reporting (ICFR)
EGCs are not subject to accounting standards that are
adopted or revised on or after April 5, 2012 until these
standards are applied to “non-issuers” (companies that have
not filed a Form S-1)
– an EGC must choose whether it will avail itself of this exemption
at the time the EGC is first required to file a registration
statement, periodic report or other report with the SEC
– an EGC is not permitted to choose to comply with some but not
all of the non-issuer accounting standards
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12. Impact of JOBS Act
Exemptions from Audit and Accounting
Requirements (con’t)
EGCs are exempt from any future audit firm rotation and
"auditor discussion and analysis" requirements adopted by the
Public Company Accounting Oversight Board (PCAOB)
EGCs are exempt from other new PCAOB auditing standards
unless the SEC determines that application of the new rules to
audits of EGCs is necessary or appropriate in the public
interest, after considering the protection of investors and
whether the action will promote efficiency, competition and
capital formation
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13. Impact of JOBS Act
Relaxed Disclosure Requirements
EGCs are not required to provide a CD&A
EGCs are permitted to provide the “scaled” executive
compensation disclosures previously available only to “smaller
reporting companies” (generally, companies with a public float
of less than $75 million, regardless of revenue or assets)
EGCs are exempt from several executive compensation
requirements imposed by the Dodd-Frank Act
– say-on-pay, say-when-on-pay and say-on-parachute votes
– pay ratio and pay-for-performance compensation disclosures
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14. Impact of JOBS Act
Acceptance of EGC Standards
Except for the extension of time to comply with new and
revised accounting standards (which must be adopted on an
“all or nothing” basis), an EGC may pick and choose among
the exemptions and relaxed standards available to EGCs
The extent to which EGC standards will be adopted by EGCs
is uncertain
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15. Impact of JOBS Act
Impact on Marketability?
The extent to which EGC standards will be accepted by the
market is uncertain
An EGC should discuss with its IPO underwriters the impact
of adopting EGC standards on marketability of the offering
Acceptance of EGC standards by underwriters and investors
may be affected by the fact that the overwhelming majority of
all IPO companies (approximately 90% based on historical
data) will qualify as EGCs
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16. Impact of JOBS Act
Conduct of Offerings
EGCs and their representatives may engage in oral and
written communications with “qualified institutional buyers”
and “institutional accredited investors” to determine their
interest in investing (“test the waters”) both before and after
the filing of a registration statement
Research analysts have greater ability to communicate with
investors and with the EGC's management
Underwriters participating in an EGC’s IPO have more latitude
to publish research reports regarding the EGC
Existing FINRA rules remain relevant, and market practices
still developing
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17. Impact of JOBS Act
Confidential Review of Form S-1
EGC can submit “draft” Form S-1 for confidential SEC review,
enabling EGC to maintain its IPO plans and disclosures in
secrecy until much later in the process
Form S-1 must be substantially complete, including all
required financial statements and audit reports, but need not
be signed by the company or include consents from auditors
or other experts
SEC review process unchanged
Confidential filing will delay any perceived benefits of filing,
such as attraction of potential acquirers
Form S-1 and amendments must be publicly filed on EDGAR
not later than 21 days before road show
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18. Impact of JOBS Act
Other Changes
The Act directs the SEC to permit general solicitation and
advertising in private placements by all companies (not just
EGCs) so long as all purchasers in Rule 506 private
placements are “accredited investors” and all purchasers in
Rule 144A offerings are “qualified institutional buyers”
The Act increases the threshold for mandatory SEC reporting
to 2,000 stockholders or 500 non-accredited investors, in
either case excluding securities issued pursuant to exempt
employee compensation plans
“Crowdfunding” permitted by private companies but subject to
registration, reporting and other requirements (crowdfunding
exemption not yet in effect)
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19. Quiet Period
During the quiet period, company must avoid all public
communications that have the intent or effect of promoting the
company to prospective investors, or otherwise arousing
public interest in the company or its securities
Statements in press releases, media interviews, website
postings or social media touting the company or its prospects
may violate the quiet period rules
Generally understood to begin at the time of the org meeting
or the selection of underwriters
Ends 25 days after the offering date
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20. Quiet Period
Sanctions for Violations
Second SEC is judge and jury
– “cooling-off” period
– corrective disclosure
– rescission risk disclosure
– civil penalties
Notable examples
– Google, Groupon, salesforce.com, Webvan
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21. Quiet Period
Safe Harbors
Rule 163A – No communication made more than 30 days
prior to initial Form S-1 filing is an offer (provided it does not
mention the offering and the company takes reasonable steps
to control re-distribution)
Rule 169 – Can continue regular release of factual business
information intended for use by persons, such as customers
or suppliers, other than in their capacity as investors or
potential investors
– does not permit forward-looking information
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22. Quiet Period
Safe Harbors (con’t)
“Test-the-Waters” – EGCs may engage in oral and written
communications with “qualified institutional buyers” (as
defined in Rule 144A) or institutions that are “accredited
investors” (as defined in Regulation D) to determine whether
such investors have an interest in a contemplated securities
offering, either before or after filing a registration statement
Rule 135 – Permits a limited public announcement that a
company is planning a public offering of securities, prior to
filing the Form S-1
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23. Quiet Period
Recommendations
In general, do not increase historic level of public
communications
Develop calendar of anticipated pre-IPO public
communications
Structure all public communications to fall within one of the
safe harbors
Review all press releases and other public communications
with counsel in advance
Prior to filing the Form S-1, restrict knowledge of the IPO
within the company on a “need to know” basis
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24. Quiet Period
Recommendations (con’t)
Avoid public disclosure of the company’s IPO plans, except to
customers, suppliers and other third parties with whom there
is a legitimate business need to share the plans
Designate company representatives who are authorized to
communicate on behalf of the company with the media, the
financial community and the public at large, and instruct all
employees to refer inquiries to the designated persons
Avoid giving interviews or otherwise being the subject of
stories, articles or other media coverage
Social media present special challenges
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25. Management
Management team should be in place early in IPO process
IPO and public company experience helpful
Adopt indemnity agreements
Consider employment and/or CIC agreements
Confirm officers and titles
Identify executive officers and Section 16 officers
Consider need for personal tax or estate planning
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26. Board of Directors
Majority must be independent within one year (most
companies target immediate compliance)
Generally want at least five independent directors for
reasonable sharing of board committee duties
Adopt indemnity agreements
Procure adequate D&O insurance
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27. Board of Directors
Independence
General Nasdaq/NYSE definition of independence:
– director can’t be “independent” if he or she does not satisfy six
bright-line tests
– assuming no disqualification under the “bright-line” tests, in order
to be “independent” Board must affirmatively determine that
director does not have a relationship which, in its opinion, would
interfere with exercise of independent judgment in carrying out
responsibilities of a director
Stock ownership, regardless of level, is generally not viewed
as an impediment to independence (except for audit
committee purposes, if over 20% post-IPO)
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28. Board of Directors
Independence (con’t)
Bright-line tests:
– director may not be a current employee or have been an
employee during past three years
– director may not have a family member who is, or has been
during past three years, an executive officer of the company
– director, or a family member, may not have accepted payments
from the company in excess of $120,000 in any 12-month period
within past three years (not including director fees)
– director, or a family member, may not be an executive officer of
an entity of which any of the company’s executive officers was a
compensation committee member during past three years
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29. Board of Directors
Independence (con’t)
Bright-line tests (con’t):
– director, or a family member, may not have certain specified
relationships with another entity that received payments from or
made payments to the company in the past three years in excess
of (1) in the case of Nasdaq, the greater of $200,000 and 5% of
the recipient’s gross revenues for that year, or (2) in the case of
NYSE, the greater of $1 million and 2% of the other company’s
gross revenues for that year
– director, or a family member, may not be a current partner of the
company’s outside auditor or have worked on the company’s
audit during past three years
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30. Board of Directors
Board Committees
Three key committees:
Audit Committee
three “super independent” directors (phase-in permitted)
need one “Audit Committee Financial Expert”
many responsibilities prescribed by SEC and Nasdaq/NYSE
Compensation Committee
need for Nasdaq/NYSE, tax and securities law reasons
importance has increased with focus on executive compensation
will soon need to be “super independent”
Nominating and Corporate Governance Committee
need for Nasdaq/NYSE, SEC disclosure and IR reasons
serves as governance “cop”
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31. Board of Directors
Audit Committee
At least three members, all of whom are “super independent”
– must satisfy general Nasdaq/NYSE independence definition
– cannot, directly or indirectly, receive any consulting, advisory or
other compensatory fee from company (other than for service as
a director or committee member)
– must not be an “affiliated person” of company
– must not have participated in preparation of company’s financial
statements during past three years
Phase-in permitted: one independent at effectiveness;
majority independent within 90 days; all independent within
one year (but many companies target immediate compliance)
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32. Board of Directors
Audit Committee (con’t)
Nasdaq/NYSE rules require all members be able to read and
understand fundamental financial statements
Nasdaq requires at least one member have “financial
sophistication” from past employment or experience in finance
or accounting, or professional accounting certification
NYSE requires at least one member have accounting or
related financial management expertise
Full board of directors must determine and disclose whether
at least one audit committee member qualifies as an “audit
committee financial expert” (as defined by the SEC)
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33. Board of Directors
Audit Committee Financial Expert
SEC definition: A person with the following five attributes:
– understanding of GAAP and financial statements
– ability to assess general application of GAAP in connection with
accounting for estimates, accruals and reserves
– experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of
accounting issues that are generally comparable to breadth and
complexity of issues that can reasonably be expected to be
raised by the company's financial statements, or experience
actively supervising one or more persons engaged in such
activities
– understanding of internal controls and procedures for financial
reporting
– understanding of audit committee functions
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34. Board of Directors
Audit Committee Duties
Must have a charter
Rule 10A-3 (SEC requirements):
– must be directly responsible for appointing, setting compensation
of, and overseeing work of auditor
– must adopt procedures for receiving and handling accounting and
auditing complaints
– must have power to engage advisors
– must have funding authority
Review and approve “related-party transactions” (required by
Nasdaq and recommended by NYSE)
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35. Board of Directors
Compensation Committee
Nasdaq requires that executive compensation be determined,
or recommended to board, by:
– a majority of independent directors; or
– a Compensation Committee comprised solely of independent
directors
NYSE requires Compensation Committee consisting solely of
independent directors
Other reasons for Compensation Committee
– tax and securities law advantages
– investor expectations
Should have a charter
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36. Board of Directors
Compensation Committee
“While there may be instances in which a board may
act with deference to corporate officers’ judgments,
executive compensation is not one of those instances.
The board must exercise its own business judgment in
approving an executive compensation transaction.”
— Vice Chancellor Noble,
Delaware Court of Chancery
August 24, 2004
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37. Board of Directors
Nominating/Governance Committee
Nasdaq requires that director nominations be made, or
recommended to board, by:
– a majority of independent directors; or
– a Nominations Committee comprised solely of independent
directors
NYSE requires Nominating/Governance Committee consisting
solely of independent directors
Other reasons for Nominating/Governance Committee
– SEC disclosure requirements
– institutional investor standards
Should have a charter
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38. Board of Directors
Controlled Companies
Definition: a company of which more than 50% of the voting
power is held by an individual, a group or another company
Exempt from many (but not all) corporate governance
requirements:
– majority of directors need not be independent
– need not have separate compensation committee
– need not have separate corporate governance and nominating
committee
Audit committee requirements still apply
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39. Board of Directors
Leadership Structure
SEC rules require public companies to discuss their board
leadership structure in annual proxy statement:
– whether and why the board has chosen to combine or separate
the CEO and board chair positions
– why the chosen structure is appropriate given the company’s
specific characteristics or circumstances
Above disclosure not required in Form S-1, but appointment of
“lead director” viewed as best practice when CEO is also
board chair
Majority of IPO companies now separate the roles of CEO
and board chair
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40. Board of Directors
Compensation
Mix of stock and cash is typical
Additional fees often paid for chair and committee roles
Increased public company demands have increased director
compensation
Directors affiliated with venture capitalists or other institutional
investors often forego board compensation, as a matter of
policy or appearance rather than any legal requirement
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41. Corporate Governance
Code of Business Conduct and Ethics
Corporate Governance Guidelines
Insider Trading Policy
Related Person Transaction Policy
Disclosure Policy
Disclosure Controls and Procedures
Other Policies
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42. Corporate Governance
Code of Business Conduct and Ethics
SEC – disclosure requirement regarding code for senior
executives
Nasdaq/NYSE – require for all employees and directors
Code must be publicly available
Amendments and waivers are publicly reported
Code must include enforcement mechanisms
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43. Corporate Governance
Code of Business Conduct and Ethics
Conflicts of interest
Full, fair, timely and
understandable
disclosure
Compliance with laws
Corporate
opportunities
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Confidentiality
Fair dealing
Protection and proper
use of company assets
Encouraging reporting
of illegal or unethical
behavior
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44. Corporate Governance
Corporate Governance Guidelines
Director qualification
standards
Director
responsibilities
Director access to
management
Director access to
independent advisors
Director compensation
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Stockholder access to
independent directors
Director orientation
and continuing
education
Management
succession
Performance reviews
Annual meeting
attendance
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45. Corporate Governance
Insider Trading Policy
Prohibit trading while aware of material nonpublic information
Prohibit tipping
Blackout periods (quarterly and special)
Pre-notification / clearance of transactions
10b5-1 plans
Limits on short selling, derivative transactions and margining
company stock
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46. Corporate Governance
Related Person Transaction Policy
Policy advisable because SEC rules require disclosure of
related person transactions and of company’s policies and
procedures for reviewing, approving or ratifying these
transactions
Typically requires transactions between company and “related
persons” to be reported to the General Counsel and reviewed
and approved by the Audit Committee in advance
Exceptions based on SEC rules often help make policy
workable
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47. Corporate Governance
Disclosure Policy
What does company plan to disclose?
Handling of material nonpublic information
– authorized spokespersons
– no comment policy
– limiting internal distribution
Disclosure Policy often supplemented by disclosure
guidelines that provide more detailed guidance for senior
executives, legal personnel and investor relations personnel
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48. Corporate Governance
Disclosure Controls and Procedures
Designed to ensure that information required to be disclosed
in SEC reports is recorded, processed, summarized and
reported within required time periods
Designed to ensure that information required to be disclosed
is accumulated and communicated to company’s
management, including its CEO and CFO, as appropriate to
allow timely decisions regarding required disclosure
Disclosure Committee is key component
CEO and CFO certification requirements
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49. Corporate Governance
Other Policies
Clawback Policy (after SEC rules mandated by Dodd-Frank
Act are adopted)
Equity Grant Policy
Investment Policy
Document Retention Policy
Attorney Conduct Policy (requiring attorneys to report material
violations of securities laws and fiduciary duties “up the ladder”
within the company, per SEC rules)
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50. Corporate and Capital Structure
Delaware reincorporation, if necessary
Evaluate current corporate structure
Make sure preferred stock converts in IPO
Authorized shares
– generally should be at least 3-5x the number of fully-diluted
shares outstanding upon completion of IPO
Stock split / reverse stock split
– used to right-size price range (pre-road show)
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51. Corporate and Capital Structure
Corporate Charter and Bylaws
Pre-IPO charter and bylaws will not be adequate for public
company
Public company charter and bylaws should:
– eliminate preferred stock and other private company provisions
– authorize adequate number of shares of common stock for postIPO use
– provide for indemnification of directors and officers
– implement any desired takeover defenses
Consider corporate opportunity and exclusive forum
provisions
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52. Corporate and Capital Structure
Takeover Defenses
Generally disfavored by ISS and institutional investors
Modest package is feasible in IPO
– classified board
– prohibition on written consents of stockholders
– limitation of stockholders’ right to call special meetings
– advance notice requirements for director nominations
– blank-check preferred stock
– Section 203 of Delaware statute
More aggressive techniques
– multi-class voting
– poison pill (can adopt post-IPO if needed)
Put in place prior to IPO (when stockholder approval is easy)
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53. Corporate and Capital Structure
Takeover Defenses — Prevalence in
IPO Companies
Classified board – 68%
Supermajority voting – 59%
Prohibition on written consents of stockholders – 79%
Limitation of stockholders’ right to call special meetings – 87%
Advance notice requirements for director nominations – 92%
Section 203 of Delaware statute – 81%
Blank-check preferred stock – 91%
Poison pill – 3%
Multi-class capital structure – 5%
Based on all U.S. IPOs, 2007-2011
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54. Corporate and Capital Structure
Stock Exchange Listing
Most IPO companies with major underwriters can satisfy the
quantitative listing standards of Nasdaq or NYSE
Listed companies must also adhere to a comprehensive set of
corporate governance standards
Should reserve ticker symbol in advance (Nasdaq permits
reservation for up to 24 months)
Nasdaq is traditional home for technology and growth
companies
NYSE is viable alternative for many companies, as NYSE has
loosened listing standards to compete with Nasdaq
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55. Equity Incentives
Pre-IPO Section 409A compliance very important
Omnibus equity incentive plan
– usually need new “public company” plan
– Section 162(m) compliance
– “evergreen” feature useful
Employee stock purchase plan
– fallen out of favor due to accounting rules
Director grants
– usually made on formulaic basis
– separate director plan not required
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56. Equity Incentives
Cheap Stock
For 12-18 months preceding Form S-1 filing, price options
based on independent, contemporaneous valuations
In Form S-1, include robust stock compensation disclosure
that is clothed in the language of the AICPA “Practice Aid”
Make supplemental “cheap stock submission” to SEC
examiner once preliminary price range known
Be extra attentive to exercise price determinations for grants
made after Form S-1 filing (and especially as road show
approaches)
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57. Financial and Audit Matters
Confirm auditor independence (note that pre-IPO and postIPO independence rules are different)
Confirm availability of all required financial statements
Consider impact of M&A deals on financial statements and
IPO timing
Assess accounting issues
Develop necessary controls and procedures
– SOX 404 in the wings (second Form 10-K)
– EGCs can skip ICFR audits for up to five years
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58. Financial and Audit Matters
Financial Statement Requirements
Three years of audited financial statements (two years for
EGCs)
Must conform to “SEC GAAP”
Consider need for segment disclosures
Separate financial statements (and pro forma combined
financial statements) required for completed or probable
acquisitions or dispositions that satisfy significance tests
under SEC Regulation S-X
XBRL data format not required until first 10-Q
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59. Getting Started
Assemble internal team
Select external advisors
Corporate housekeeping / diligence
Legal compliance
Governance / public company preparation
Choose underwriters
Begin Form S-1
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60. Getting Started
Internal Team
Management
– CEO, CFO, General Counsel, Controller
– additional finance and accounting staff
– investor relations professional
Board of Directors
– determine willingness of current directors to continue
– plan for possibility that VC/PE directors will leave Board following
IPO
– consider skillsets, industry and public company experience,
diversity
– provide adequate time to recruit new directors
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61. Getting Started
External Advisors
Independent auditor
– continuity of audit firm helpful
– consider timing of audit partner rotation
Company counsel
– IPO, public company and SEC experience essential
– Incumbency helpful
Others
– compensation consultant
– investor relations firm
– financial printer
– transfer agent
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62. Getting Started
Corporate Housekeeping/Diligence
Ensure board, committee and stockholder minutes and
consents are complete
Clean-up stock, option and warrant records
Identify notice, consent and waiver requirements
Confirm investor agreements terminate in IPO
Review financing transaction documents
Review M&A documentation
Review other corporate records
Consider intellectual property “audit”
Assess legal compliance
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63. Getting Started
Legal Compliance
Securities laws
– employee grants (Rule 701)
– financing transactions
Privacy and information security
Employment
Sales and use taxes
Export controls
FCPA
Pending and prospective litigation
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64. Getting Started
Governance/Public Company Preparation
Begin to develop governance practices and policies that
satisfy SEC and stock exchange requirements, meet business
needs, and are consistent with company culture
Become familiar with IPO and public company topics:
– potential liability
– responsibilities of directors and officers
– corporate governance requirements
– periodic reporting and public disclosure obligations
– officer certification requirements
– insider trading and reporting obligations
– post-IPO stock sales
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65. Getting Started
Underwriters
Company should begin to cultivate underwriting relationships
6-12 months before organizational meeting
Multiple bookrunners now commonplace
Co-managers used to round out underwriting team
Consider each candidate’s track record, team members
(including research analysts), commitment to the company,
industry experience, distribution capabilities, aftermarket
support, reputation and financial strength
If seeking discount below the 7% norm, should discuss up
front, when banks are competing for the engagement
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66. Getting Started
Form S-1
Identify “comps”
Stage the drafting
– Business
– MD&A / financial disclosures
– Management / compensation disclosures
– Risk Factors
Selling stockholders
Related person transactions
Material contracts and confidential treatment
Consider JOBS Act relief
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67. SEC Review
Initial comments in 27-30 days
Total of 4-5 comment letters, with quicker turnaround each
time
SEC comments typically focus on financial statements (17%),
business (10%), MD&A (14%), risk factors (10%), summary
(10%) and executive compensation sections (8%)
Company-specific comments based on staff review of filing
and other public disclosures
Time from initial filing to pricing is typically about four months
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68. SEC Review
JOBS Act
Disclose EGC status on prospectus cover
Describe how and when EGC status may be lost
Describe exemptions that are available to the company
Indicate whether taking advantage of extended transition
period for complying with new or revised accounting
standards
– If yes, provide risk factor indicating that financial statements may
not be comparable to those of other public companies
– If no, indicate that decision is irrevocable
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69. SEC Review
Non-GAAP Financial Measures
Revised SEC interpretive guidance (January 2010) more
tolerant of use of non-GAAP financial measures, including in
IPOs
Staff insists on compliance with applicable rules
Staff will object to non-GAAP financial measures it considers
misleading, such as Groupon’s short-lived “Adjusted
Consolidated Segment Operating Income”
Exclusion of recurring operating expenses viewed with
skepticism
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70. SEC Review
MD&A
Key metrics used by management to monitor and evaluate
company’s financial condition and operating performance
Known trends and uncertainties
Revenue recognition
Segment disclosures
“Cheap stock” disclosures (including FMV determinations in
past 12-18 months and justification of step-up from most
recent FMV determination to mid-point of price range)
Acquisition accounting
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71. SEC Review
Executive Compensation Disclosures
More analysis in CD&A of reasons that specific compensation
decisions were made
Description of CEO’s role in determining compensation of
other executive officers
Identification of peer companies used for benchmarking
Disclosure of quantitative performance targets for incentive
compensation
CD&A not required for EGCs
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72. SEC Review
Related Person Transactions
SEC staff is very attuned to nature and placement of related
person disclosures
Basic rule requires disclosure of all company transactions in
excess of $120,000 in past three years in which any executive
officer, director or 5% stockholder had or will have a material
interest
Material relationships between company and underwriters or
selling stockholders also need to be disclosed
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73. SEC Review
Stockholder Rights
Staff’s longstanding requirement to disclose impact of antitakeover provisions is extending to new techniques affecting
stockholder rights
If company has multi-class capital structure, staff will require
prominent summary of differential voting rights on prospectus
cover and elsewhere
If company has “exclusive forum” provision in charter or
bylaws (requiring all stockholder claims against company or
its directors to be brought in designated court), staff may ask
company to address provision’s enforceability
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74. SEC Review
Recurring Drafting Comments
Condense summary and make it more balanced
Make risk factors specific to the company
Eliminate industry and technical jargon
Substantiate leadership claims and other assertions
Reconcile inconsistencies within prospectus and when
compared to company website
Remove disclaimers and mitigating language
Provide staff with industry research reports cited in prospectus
and file consents for reports that are not publicly available
Add explanations provided in response letters to prospectus
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75. Life as a Public Company (in a nutshell)
SEC reporting (10-Ks, 10-Qs, 8-Ks)
CEO and CFO certifications (10-Ks, 10-Qs)
Intense focus on corporate governance and executive
compensation
Disclosure duties and rules (Regulation FD)
Financial reporting (“SEC GAAP,” acquisition financials, nonGAAP financial measures)
Insider trading reporting and liability (Section 16)
Insider sales (lockups, 10b5-1 plans, Rule 144)
Investor relations (annual meetings, proxy statements,
earnings calls, financial guidance)
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76. For More Information
Lisa Firenze
Lisa.Firenze@wilmerhale.com
+1 212 937 7263
Brian Johnson
Brian.Johnson@wilmerhale.com
+1 212 937 7206
Wilmer Cutler Pickering Hale and Dorr LLP is a Delaware limited liability partnership. WilmerHale principal law offices: 60 State Street, Boston, Massachusetts 02109, +1 617 526 6000;
1875 Pennsylvania Avenue, NW, Washington, DC 20006, +1 202 663 6000. Our United Kingdom offices are operated under a separate Delaware limited liability partnership of solicitors
and registered foreign lawyers authorized and regulated by the Solicitors Regulation Authority (SRA No. 287488). Our professional rules can be found at www.sra.org.uk/solicitors/codeof-conduct.page. A list of partners and their professional qualifications is available for inspection at our UK offices. In Beijing, we are registered to operate as a Foreign Law Firm
Representative Office. This material is for general informational purposes only and does not represent our advice as to any particular set of facts; nor does it represent any undertaking to
keep recipients advised of all legal developments. Prior results do not guarantee a similar outcome. © 2014 Wilmer Cutler Pickering Hale and Dorr LLP
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