Category Archives: Strategies for Going Public – IPO

The closing

The closing
The closing marks the conclusion of the IPO. In a firm
commitment offering, the closing typically occurs three
business days after the pricing. This period allows the
underwriters to receive payment from purchasers of the
stock in the offering. In a best-efforts offering, the closing
will occur after all the shares have been sold, or the
company and underwriters agree that selling efforts can
be concluded.

The closing is a formal meeting to exchange executed
documents, including certificates and legal opinions. The
closing is usually attended (in person or by phone) by the
company and its counsel, the lead underwriter and its
counsel, the registrar and transfer agent, and the auditors.
Among the actual exchanges that occur, the underwriters
wire the company immediately available funds for the
net proceeds of the offering, the registrar and transfer
agent record the stock, the stock sold is credited to the
underwriters’ accounts through DTC, counsel provide their
legal opinions, and the auditors give the underwriters a
second comfort letter as of the closing date, referred to as
the bring-down comfort letter.



Transfer agents and registrars

Transfer agents and registrars
You will need to appoint a transfer agent and registrar
before the closing of your IPO. Stock registration and
transfer services are provided by commercial banks and trust
companies. Companies often appoint the same organization
to provide both services. Furthermore, the same firm can
assist during the IPO process by acting as the custodian and/
or paying agent in connection with the sale of securities by
any selling shareholders.

For most companies undertaking an IPO, the question of
transfer agents and registrars is one of both expediency and
regulation. Both the NYSE and NASDAQ require that all listed
securities be eligible to participate in the Direct Registration
System (DRS) offered by The Depository Trust Company
(DTC). In order for any securities to become DRS-eligible,
the DTC requires that the issuer appoint a transfer agent
who is a participant in the DTC’s Fast Automated Securities
Transfer program, as well as meet certain other eligibility
requirements. The DRS enables the registered shareholders
to maintain and transfer their shares on the books and
records of the transfer agent in book-entry form instead of a
physical stock certificate. Participating in DRS can save costs
involved with replacing stock certificates that are lost, stolen,
or destroyed.
A public company will usually have a large number of
shareholders and, as regular trading develops, shares likely
will change hands daily. Not only is this an administrative
burden, but transfers must be handled with absolute
accuracy, because any mistake can lead to claims against
the company and possible financial liability. An independent
transfer agent and registrar can assume responsibility for
making sure that mistakes in stock transfers do not occur.
Further, as a practical matter, your agreement with the
underwriters may require such independent agents.
The transfer agent’s primary responsibilities are to handle
the transfer of shares from one person to another and to
maintain the stock books that are the official records of
the names and addresses of the company’s shareholders.
Ancillary responsibilities assigned to transfer agents may
include disbursing cash dividends, mailing annual reports
and proxies, distributing stock dividends, responding to
shareholder inquiries relating to their shares, and keeping
custody of unissued stock certificates.
Registrars are responsible for making sure that stock is not
over-issued in excess of the number of authorized shares.
They countersign all stock certificates to make sure the
number of shares issued is not greater than the number
surrendered for cancellation, and they keep active records
of all the shares that are outstanding. Registrars also keep
records of the certificates that have been canceled, lost, or
destroyed, as well as those that have been issued, so that
at any given moment they have an exact record of shares
outstanding. Part of their role is to cross-check the work of
the transfer agent.
A summary of the transfer agent/registrar process is listed
on the next page. See also Appendix D: A timetable
for going public for steps taken by a transfer agent and
registrar in the illustrative IPO timeline.



Chapter 8. Closing the deal

You have come a long way: stay focused as the IPO is around
the corner.

The closing of a public offering is not a simple affair, as it is governed by both the underwriting industry’s traditions and government regulation through the SEC. It is important that everything be done properly, so as not to risk wasting the long and costly preparation work and damaging the public perception of your company.


Signing the underwriting agreement
Generally, you do not enter into a written underwriting
agreement until the end of the IPO process, after the
registration statement is declared effective by the SEC and
the offering price has been determined.
Until that time, you have only a draft copy of the
underwriting agreement (that has been negotiated
by your attorneys and the underwriters’ counsel) and
an oral understanding with the underwriters. The
oral understanding with the underwriters is not a
legal commitment by either side to proceed with any
predetermined transaction.
Timing becomes quite important as the effective date of the
registration statement approaches. The end of the roadshow
and the completion of the book-building process (resulting,
it is hoped, in significant public momentum for the offering)
are targeted to occur at about the same time as the SEC
review process is completed. The registration statement
is then declared effective by the SEC. On that day, the
lead underwriter and the board (or the pricing committee
of the company), which is responsible for reviewing the
underwriter’s report of indications of interest and allocation
of shares, as well as agreeing on final pricing, agree on the
selling price to the public. The lead underwriter and the
other underwriters participating in the syndicate also legally
agree to their participation in the underwriting.
The agreement among underwriters authorizes the lead
underwriter to sign the underwriting agreement, specifies
the terms on which the other underwriters will participate in
the syndicate, and spells out the responsibilities of the lead
underwriter to manage the offering.
Immediately after the pricing of the offering, the
underwriting agreement is signed by the company, the
lead underwriter, and the selling shareholders, if any.
The agreement includes the offering price of the stock;
commissions, discounts, and expense allowances; the
method of underwriting; representations and warranties;
and an indemnification agreement. It also sets a number
of conditions to the underwriters’ obligation to complete
the offering (for example, that there is no material adverse
development impacting the company between pricing and
closing). Until the underwriting agreement is signed, the
company has no legal right to compel the underwriters to
proceed with the IPO. Once the underwriting agreement is
signed, the company files a Rule 424 final prospectus with
the SEC and actual sales commence.
As a practical matter, once preparation of the registration
statement begins, underwriters rarely refuse to complete
the offering, unless significant adverse changes in market
conditions occur or the registration process reveals serious
problems at the company of which the underwriters were
previously unaware. The lead underwriter has substantial
motivation for completing the offering, since it has
invested considerable time and expense in investigating
the company’s business and affairs, helped to prepare the
registration statement, and organized a selling syndicate.
The public perception of a failed IPO is damaging to the
reputations of both the company and the lead underwriter.
Should the market cool significantly during the waiting
period, however, it is not unusual for an IPO to be
postponed or canceled after the registration process starts. If
the market is not willing to accept the originally anticipated
price range or to absorb an offering as big as the one
contemplated, the company may be faced with the choice
of accepting an offering of unsatisfactory size or price,
postponing the offering until the market improves, or even
abandoning the IPO altogether and pursuing other financing
options. Additionally, if the final size or pricing of the
offering is outside the range originally on the distributed red
herring prospectus, it may be necessary to recirculate a new
red herring prospectus with an updated price range.



The roadshow

Common during the quiet period is a two-or three-week
speaking tour of the company’s top executives and the lead
underwriter, often referred to as a roadshow. The tour often
covers a dozen or more cities with key financial centers
where institutional or individual investors have indicated
strong interest. In offerings where some shares will be sold
internationally, the roadshow can include international stops.
The roadshow is usually organized by your lead underwriter.
The filing requirements of roadshows are covered by an SEC
rule (Rule 433 under the 1933 Act). Most roadshows will not
be deemed to be free writing prospectuses and, therefore,
will not need to be filed. Most are live presentations and will
be deemed not to be written or graphic communications
even if they are simultaneously webcast or transmitted with
the live presentation into other locations. The slides that are
generally used in presentations are also not deemed to be
written or graphic communications if they are transmitted
simultaneously with the live presentation. In contrast,
prerecorded electronic roadshows for an IPO will be deemed
free writing prospectuses and will have to be filed, unless
the company makes at least one version of the electronic
roadshow available without restriction to any person (for
example, by posting it on the company’s website), which
many companies do to avoid the filing requirement.
The roadshow’s purpose is to make presentations to key
potential investors, portfolio managers, and analysts.
These meetings allow people to ask questions about the
company and the material contained in the prospectus.
The information covered during the presentations and the
questions from participants will be similar to the earnings
and analyst calls expected after you go public. They are
meant to build enthusiasm and momentum for the offering
and normally occur within days of the pricing of the
You should view these meetings as opportunities to present
the story of your company to those people who will buy
your stock, sell the stock for you, or influence the people
who buy. The company needs to be extremely cautious prior
to presenting forecasts to potential investors and should
discuss the advisability of this with counsel well in advance
of the roadshow.
Many of these key investors, portfolio managers, and
analysts will be participating in future quarterly earnings
announcement conference calls (after you go public) and
will otherwise follow the company’s progress. If you are
meeting them for the first time, you should take care to
convince them that you and your associates are people of
ability and integrity who will provide solid leadership for your
company in the years ahead. Your purpose is to demonstrate
not only the growth potential of your company, but also the
executive capacity of your team.
An investor relations advisory services firm may assist you
with independent and objective counsel on prospective
investors. The ranking of institutional investors based on
investment criteria and quantitative modeling will assist
in prioritizing opportunity and time during the investor
outreach process. This will allow an issuer to be selective
and precise when dealing with the institutional investment


Roadshows (like all other publicity during the offering), even
if they do not have to be filed with the SEC, are still subject
to the antifraud provisions of the securities laws. You should
be very careful about what is said in the roadshow, and
the company’s legal counsel should review the roadshow
presentation. The underwriters, legal counsel, and investor
relations advisory services firm may provide coaching on
what questions to expect, how to answer them, and what
you can and cannot say during those meetings. A roadshow
can be very grueling but it is an important component of
the IPO process. Before, after and between presentations,
including at meals, you may meet with individual analysts
who specialize in your industry and can help build
relationships and coverage of your offering. The tour can
educate the financial community about your company and
help generate and sustain interest in your stock through the
period of the offering.

Making the best presentation
When you and your top executives present the roadshow
and appear before analysts, brokers, and investors,
your company will likely be judged in large measure
on the strength of your performance. How clear is the
presentation? How well organized is everyone? Can you take
the heat of tough questions?
While you can expect guidance and suggestions from your
underwriters, attorneys, and others on how to conduct
yourselves, you should be sure that you are comfortable
with the presentation — both what is in it and how it is
presented. This is your opportunity to tell your company’s
story, and you will have to execute operationally to meet
the expectations that you and your management team have
set through these presentations and the disclosure in the



Restrictions on offers


Once you have filed the registration statement and the
quiet period begins, you are forbidden to make any
written offers, such as through sales literature regarding
the offering, except by means of the red herring
prospectus and a free writing prospectus (described
below). Oral selling efforts (conversations between the
company or its underwriters and the prospective buyers
relating to information in the prospectus) are allowed,
but you must be careful even in oral conversations. If
oral communications are taped for broadcast or placed
on a website, they can be considered a written offer in
violation of SEC rules.

With the continued expansion in
use of the internet and social media, the SEC has adopted
rules to set the boundaries between oral and written
communications. Written communication is defined to
be any communication that is written, printed, a radio
or television broadcast, or a graphic communication.

Graphic communication includes all forms of electronic
media, including audio and video recordings, facsimiles,
digital storage devices, e-mail, internet websites,
computers, computer networks, or other forms of
computer data compilation. However, it does not include
a communication that at the time of the communication
originates live, in real time to a live audience, and does
not originate in recorded form or otherwise as a graphic
communication, although transmitted through graphic
These definitions become very important in dealing
with the roadshow (described below) and information
distributed through social networking media. As a part
of the briefing that counsel provides to officials in the
company, these rules and their application, including to
social networking sites, should be reviewed.

Free writing prospectus

To provide companies more flexibility during the offering,
in light of modern communication methods and the wide
dispersion of information, companies entering an IPO can
use what are called “free writing prospectuses” during
the quiet period after the registration statement that
contains a price range has been filed with the SEC. Free
writing prospectuses are any written communication that
constitutes an offer to sell or solicitation of an offer to buy
securities that are or will be the subject of a registration
statement, other than the statutory prospectus included
in the registration statement, or a communication after
the effective date of the registration statement that is
accompanied or preceded by a statutory prospectus.

Free writing prospectuses must include a prescribed legend
and most must be filed with the SEC. In addition, free
writing prospectuses must be accompanied or preceded
by a physical copy of the most recent statutory prospectus,
although this requirement will be satisfied, in the case of
an electronic free writing prospectus, if the latter contains
an active hyperlink to the statutory prospectus.

The freewriting prospectus may contain additional information
that is not found in the registration statement, but cannot
conflict with the information found in the registration
statement. The rules pertaining to the free writing
prospectus are complicated and you should work with your
legal counsel to ensure compliance



Also allowed are short press releases under Rule 134. Rule
134 “safe harbor” permits written communications that
include information with respect to the securities being
offered (the title, amount being offered, offering price, etc.);
proposed stock exchange listing; the type of underwriting,
names of underwriters, names of selling security holders,
and a brief description of the intended use of proceeds
of the offering, if then included in the disclosure in the
prospectus that is part of the filed registration statement;
the anticipated schedule for the offering and a description
of marketing events (including dates); and a description of
the procedures by which the underwriters will conduct the
offering. The purpose of the press release is to announce the
offering in the press and to tell interested parties where they
can obtain a copy of the prospectus.
Also allowed is a “tombstone” advertisement under Rule
134, so-called because of its formal, sparse wording,
and lack of adornment. Traditionally the tombstone
advertisement is issued after the pricing of the offering.

Chapter 7 Marketing the offering

Chapter 7. Marketing the offering

Understanding quiet period activities is key to getting your IPO
to the finish line.

“….The time period between the initial filing of your registration statement and the time the registration statement is declared effective by the SEC is referred to as the waiting period or quiet period. This is a misnomer, however, as there is a flurry of extremely important activity during this time, occupying both the underwriters and the company. It is during this period that the marketing effort takes place….”


The marketing process
After the registration statement is filed with the SEC, the
lead underwriter begins the process of forming a group, or
syndicate, of underwriting firms that agree to participate
in the offering. The syndicate is formed to obtain a broad
distribution of the stock and to provide a balance between
institutional and retail investors. The primary forms of
underwriting are the firm commitment, best-efforts and
Dutch auction process, with the firm commitment being by
far the most common. In a firm commitment underwriting,
the underwriters bear the risk of selling the shares, while in
a best-efforts, process the underwriters are not responsible
for any unsold shares. In a Dutch auction, the price is
determined through a bidding process with the price of the
shares set at the highest price that will result in the entire
offering being sold. As firm commitment underwriting
accounts for the vast majority of IPOs, we have focused on
this type of offering in this publication.
In a firm commitment underwriting, the syndicate members
participate with the lead underwriter in assuming the risk
of selling the stock. The lead underwriter usually purchases
the largest portion of the shares offered and brings into
the group enough members to purchase the remainder.
Each member makes a commitment to purchase a certain
number of shares. When the SEC review process has
reached a point that the company and the lead underwriter
are sufficiently comfortable to print the red herring, the
salespeople for the firms in the syndicate begin letting their
clients know about the offering and furnishing them with
copies of the preliminary prospectus. The syndicate may
also include selling group members who are dealers that
agree to purchase a specific number of shares at the public
offering price less a selling concession. These selling group
members do not share all the potential liabilities under
the securities laws with the underwriters and, as a result,
receive less compensation.
Selling the shares is really a group effort. The lead
underwriter “builds the book,” keeping track of the
outstanding indications of interest. Some participating
underwriters may actually sell two or three times their
commitment, and others may sell none. The company’s
participation in the roadshow is the single most important
vehicle for building momentum for the offering. If
momentum is strong, the lead underwriter’s “book” may
reflect demand that significantly exceeds the size of the
offering. This is good, as it allows for some inevitable
slippage in actual orders (from the number of indications
of interest) and provides for continuing demand in the
secondary market. Because the underwriting agreement
is not signed, the lead underwriter and the syndicate
members know how strong the demand is for the stock
before they are legally committed to purchase shares
from the company. So, as a practical matter, their risks in
selling the shares are limited. After pricing occurs and the
underwriting agreement is signed, the underwriters will be
required to purchase the full amount of their commitment
(except under very limited circumstances).

As indicated previously, the underwriters have a good
sense of how many shares can be sold before they enter
into the underwriting agreement. Although the preliminary
prospectus indicates the anticipated number of shares to
be sold and the expected price range, the underwriters find
out during the quiet period just how acceptable that price
and offering size are to investors. Both factors may change
before a registration statement becomes effective.

If your underwriters have done a thorough job, any changes
during this period will generally reflect only changes in
market conditions. Throughout the registration process, a
series of pricing discussions are likely to occur between you
and the lead underwriter to set the initial price and size of
the offering and to apprise you of any needed revisions.
The 1933 Act prohibits any public offers of a security, either
orally or in writing, before the initial filing of the registration
statement. In this context, what constitutes an offer has
been defined very broadly by the SEC and the courts. Any
publicity effort, if deemed to create a favorable attitude
toward the securities to be offered and to stimulate the

market artificially, may lead to what is called “gun jumping”
and result in possible sanctions or fines by the SEC in
addition to delaying the offering.
The JOBS Act created an important exception to this general
rule prohibiting gun jumping. An EGC or its authorized
representative may “test the waters” before or after filing
a registration statement by engaging in oral or written
communications with qualified institutional buyers (QIBs) or
institutions that are accredited investors to assess interest
in a contemplated offering. Communications to “test the
waters” will not have to be filed with the SEC as free writing
prospectuses (discussed below).
The SEC, through various releases and rules, has established
guidelines for the publication of information other than
the prospectus, both before and after the filing of the
registration statement. It is very important that everyone
in the company be aware of these guidelines. From the
time that you begin to work on the IPO process, it is
strongly recommended that all press releases and interview
requests be cleared with your legal counsel and your lead
underwriter. Your key executives should also meet with
company counsel and the lead underwriter to review what
may and may not be said publicly about the company, as
failure to comply can lead to a halt in the IPO process until
the interest that has been stimulated has cooled down.
The practical period of time covered by the guidelines
extends from 30 days prior to the filing of the registration
statement to 25 days after the effective date of the
registration statement, when broker-dealers are no longer
required to deliver a prospectus to potential investors (or
90 days if, following the IPO, the company is not listed on a
stock exchange or certain OTC markets). During this period,
any publicity release can raise questions about whether
the publicity is part of the selling effort, even if the release
contains no offer or even a mention of the company’s effort
to sell securities. Even before this period starts, there can
be problems with communications that make any reference
to the contemplated offering. In addition, if company
executives give interviews where the ultimate date of
publication is uncertain, problems can arise. In those cases,
the company must take reasonable steps within its control
to prevent further distribution of the information during
the 30-day period prior to filing the registration statement.
There have been many recent examples of companies
having difficulty with the quiet period restrictions. Most
notably, companies have granted interviews that were
published during the quiet period. This can require the
company to delay its offering until the increased publicity
surrounding the offering has dissipated, and it may require
additional filings with the SEC.
Rules promulgated by the SEC under the 1933 Act provide a
“safe harbor” for continued communications at any time by
or on behalf of a non-reporting issuer of regularly released
factual business information by the same employees
who have historically been responsible for providing such
information to persons other than investors or potential
investors. This safe harbor does not permit the publication
or dissemination of forward-looking information by
non-reporting issuers. In addition, the safe harbor does
not permit communications containing information about
a registered offering or communications released as part
of offering activities. The company should particularly not
disclose anything as to valuation or projections of future
performance. In addition, a specific rule (Rule 135) provides
a safe harbor whereby certain limited announcements
regarding a proposed public offering are deemed not to
constitute an offering. In particular, Rule 135 provides that
a notice of a proposed offering (e.g., a press release or a
written communication directed toward employees) will not
be deemed to be an offer if it states that the offering will
be made only by a prospectus and the notice contains no
more than the information specified by the rule, including


Lock-up agreements.

Lock-up agreements.

At the time of filing the registration statement,
the underwriters will want to make sure that
highly visible employees and shareholders of the company
do not sell their shares for a period of time after the IPO
is completed.

This is generally done to allow an orderly
trading market to develop without additional shares being
dumped into the market. To make sure that this occurs,
the underwriters will most likely require that the officers,
directors, large shareholders, and other listed management
enter into a lock-up agreement whereby such shareholders
agree not to sell or otherwise transfer their shares for
a certain period of time.

The duration of the lock-up agreement is typically 180 days,
but can range in its duration from 90 days to one year.


Post-filing activities

Post-filing activities
SEC Review. Once the registration statement is completed
and the initial form has been filed with the SEC, it will be
reviewed by the SEC’s Division of Corporation Finance (DCF)
to monitor compliance with the applicable disclosure and
accounting requirements. You should anticipate that your

IPO registration statements will receive a full cover-to-cover
review by both a legal and accounting examiner. The DCF’s
staff commonly finds deficiencies or items that it questions
or believes require additional explanation. These are
communicated through a comment letter.
The SEC typically responds to the initial filing within 30 days
by issuing a comment letter that requests clarification and
seeks changes in the registration statement and prospectus.
The company, with the assistance of its advisors, prepares
a written response to each comment. The accounting and
legal responses are typically submitted to the SEC along with
an amendment to the registration statement that includes
any changes made as a result of the SEC comments and
other changes to update the registration statement. The
SEC will review the amended registration statement and
response letter when filed and provide another comment
letter. This process continues until all questions are resolved
and involves a number of rounds of comments and
additional amendments. The timing of the SEC review on
the amendments can vary based on the significance of the
changes and the SEC’s workload at the time, but is usually
within 10 days.
The comment letters from the SEC and the company’s
response letters ultimately will be available publicly on the
SEC website. However, companies can request to have
portions of their responses remain confidential. Some regular
areas of focus for SEC comment letters are as follows:
• Executive compensation discussion and analysis
• Share-based compensation
• Significant business acquisitions and pro forma financial
• Revenue recognition
• Complex equity instruments
• Clarification of accounting policies
• Clarification of related-party transactions
• Need for consent if a reference to a valuation firm
regarding the valuation of a registrant’s common and
preferred stock is included
You will need to reach agreement with the SEC in response
to all comments before the registration statement can
become effective. Any contentious issues with the SEC can
be discussed via telephone. It is recommended that this
be done early in the process, if it becomes clear there is a
misunderstanding of facts. You should discuss these issues
with your legal advisors and auditors prior to conversations
with the SEC.
As the comment letter process nears completion, you will
need to decide when to print the red herring. If the red
herring is distributed before all substantive SEC comments
are resolved, there is a risk that the SEC will require
additional changes to the registration statement, and a
redistribution of the red herring may need to occur. Due
to the risk of potentially having to distribute a revised red
herring and the associated costs, most companies do not
print their red herring until substantially all of the SEC’s
comments have been resolved.
The roadshow is timed to coincide with the distribution
of the red herring. Since the red herring used during the
roadshow contains a price range, pricing discussions will
have occurred prior to filing the amendment containing
the red herring. Final pricing discussions occur after the
completion of the roadshow. See further discussion of the
roadshow in Chapter 7.
Companies (together with the lead underwriter) must
file a request for acceleration of effectiveness. When
the SEC grants your request for acceleration, it issues an
order declaring your registration statement effective. The
exchange (wherever the stock will trade upon completion of
the offering) will also submit its approval of the company for
listing. See further discussion of the closing in Chapter 8.
As soon as you receive notification of the effectiveness
of the registration statement and pricing occurs, the
transaction team will work to complete the final prospectus.
This prospectus will have the final pricing information
included and the red herring legend removed.
Blue Sky and FINRA clearance. Even though you file
a registration statement with the SEC, you may need to
comply with the “Blue Sky Laws” of the states where the
stock is offered and sold. Blue Sky is the general term

applied to the states’ securities laws and regulations.
The name is derived from a court decision on the
constitutionality of Kansas securities regulations, which were
aimed at preventing “speculative schemes which have no
more basis than so many feet of blue sky.” Many states have
adopted the Uniform Securities Act as the model for their
state blue sky laws, which facilitates the state filing process;
however, some states, like California, Illinois, New York,
and Texas, have their own securities regulatory statutes and
regulations, adding complications to the process. In order
to facilitate an orderly national distribution of securities in
offerings where the securities will be traded on national
markets (and in certain other cases), Congress enacted
the National Securities Markets Improvement Act (NSMIA)
in 1996, which preempts from state registration public
offerings of securities to be traded on national markets.
Where NSMIA does not apply, you will be subject to each
individual state’s securities laws and regulations. Many states
do not permit you to circulate a preliminary prospectus until
you have filed their state application forms for registration
or notice. Thus these filings should be completed and filed
with the applicable states when the registration statement
is filed with the SEC. In contrast to the SEC, which focuses
on disclosure only, some states do evaluate the “merits”
of the offering and its suitability for investors in their state.
The lead underwriter will generally advise you of the states
in which the underwriters wish to sell the securities and
the amount of securities to be qualified in each state.
Underwriters’ counsel generally takes care of the filings,
which vary from filing a notification of intent to sell to
qualifying the offer and sale with a registration statement in
other states.
SEC regulations also call for clearance by FINRA of the
amount of the underwriters’ compensation and other
terms of the offering. FINRA reviews not only the
underwriting discount, but also other compensation that
the underwriters are deemed to receive in connection
with the offering (such as options or warrants, finders’
fees and reimbursement of expenses normally borne by
the underwriters) to determine whether the underwriting
arrangements are fair and reasonable. It is mandatory to file
the registration statement with FINRA within one business
day of filing with the SEC if the offering is not exempt
from filing with FINRA. This allows sufficient time for
FINRA clearance and possible changes in the underwriting
agreement that FINRA may require.
Lock-up agreements. At the time of filing the registration
statement, the underwriters will want to make sure that
highly visible employees and shareholders of the company
do not sell their shares for a period of time after the IPO
is completed. This is generally done to allow an orderly
trading market to develop without additional shares being
dumped into the market. To make sure that this occurs,
the underwriters will most likely require that the officers,
directors, large shareholders, and other listed management
enter into a lock-up agreement whereby such shareholders
agree not to sell or otherwise transfer their shares for
a certain period of time. The duration of the lock-up
agreement is typically 180 days, but can range in its
duration from 90 days to one year.
As you prepare for the registration process, you may
want to consider your communication strategy with your
employees and management team about these types
of agreements.




– ROADSHOW…………..






….DATE )


………….. HERE IT IS…WHERE WE ARE NOW……………………..



Red Herring

The “red herring.” The preliminary prospectus is typically
printed after the company and its advisors conclude that
resolution of the remaining comments from the SEC is
not likely to require material revisions to the preliminary
prospectus and a new circulation to potential investors. As
the required cautionary language is printed on the front
cover in red ink, the preliminary prospectus is typically
referred to as a “red herring.” This language is as follows:
The information in the preliminary prospectus is not
complete and may be changed. These securities may not be
sold until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is
not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any state where the offer or
sale is not permitted.
The red herring prospectus may be distributed to the
general public. Since it is created before the pricing of
the offering, it does not contain the exact offering price.
However, the SEC requires that a bona fide estimated price
range be disclosed. If the final pricing is outside the range
set forth on the red herring that was distributed, you will
have to determine the necessary legal requirements, which
require a thorough and sometimes complex analysis, and
may require an additional filing and other actions. If this
change occurs, you should consult with counsel and refer
to the SEC guidelines on this topic

Printing. Early drafts of the registration statement are
typically managed by the company’s attorneys. After the
initial drafts have been discussed and edited, the document
is usually sent to a financial printer. Only a few firms
specialize in financial printing. These printers will be alert to,
and aware of, changing SEC rules and regulations regarding
prospectus and registration statement presentation,
format, and required size of type. The printers will also be
sensitive to your need for complete accuracy, timelines,
and confidentiality. The registration statement, including all
exhibits, is required to be filed on the SEC’s EDGAR system.
The major financial printers are set up to accommodate the
EDGAR filing process. The SEC’s EDGAR system provides
online access (at to most SEC filings and may
be extremely useful to you when drafting your registration
statement. Through the SEC website, you can access
previous registration statement filings to utilize as examples.
Your underwriter will also supply examples of previous
registration statement filings since the underwriters typically
have their own preferences.
Printing costs vary with the number of proofs and revisions
made and the extent of the revisions required between the
original filing and the final printing. Once the drafts are in
printed form, involved parties invariably notice details that
were overlooked. Authors’ alterations are very expensive
as revisions are usually requested from the printer on a
quick turnaround basis often resulting in overtime charges.
However, revisions cannot be avoided as they are essential
and often reflect updates, clarifications, and other changes.
With careful planning and organization, you can minimize
revisions to save time, money, and frustration.
Keep everyone involved in reading the early drafts and do as
much in-house editing as possible in advance of forwarding
your draft to the printer. Color art for the inside cover of
the prospectus, illustrations and related legends, pie charts,
and graphs should be prepared and approved in advance.
The artwork must be just as accurate as the rest of your
prospectus and must be submitted to the SEC for review.

For example, in a company’s registration statement, a four-color
illustration of all its various products was presented. The
SEC questioned why one of the depicted products was not
described in the prospectus and found that the product was
no longer being manufactured. The result was the artwork
had to be redone and reprinted.
The printing of the final prospectus will be done after the
registration statement is declared effective by the SEC and
pricing occurs. The printing is done rapidly to facilitate its
distribution. Most financial printers are familiar with these
time constraints.