Many people refer to the process of finding the right broker dealer to take their company public as a “beauty contest.” This is largely because there are a number of considerations that go into making the decision as to the right broker-dealer to handle an initial public offering.
Initial public offerings require an in-depth underwriting process. Underwriting firms are tasked with not only verifying the company has met all the requirements under the Securities and Exchange rules, but, they are also financially responsible for whatever amount of stock they believe the offering will sell during the public offering phase. The first step you must make before you agree on a broker dealer for this relationship is verifying the following:
1.) Financial capability – Verify the company has the financial capacity to ensure they can purchase the shares they agreed to during the IPO. This should not be particularly difficult since most firms who are handling underwriting are well known. When an investment bank offers to bring your company public on a “best efforts” basis this is not necessary
2.) Expertise is important – Some firms have experience with high-tech companies, others with financial companies. Before you seal the deal to help you go public, research their level of expertise in your field. Asking the company to show what companies they have taken public in your field is sensible and can help avoid disappointment
3.) Talk about fees – There is little doubt that taking a company public can be one of the most expensive (and time-consuming) ways to raise money. Fees may vary greatly between investment banks so it is a good idea to find out what fees each firm charges before deciding which one is right for your needs
4.) Dealing with the process – In many cases, the broker dealer you agree to place your IPO with will help with the processes you need to take to go public. This includes preparing your offering statements, registration statement and prospectus. Whether they work with your attorney or their in-house attorney will be a matter to be discussed prior to signing any deal.
5.) Talk about investors – Institutional clients are typically the first ones to have access to IPO shares. Once the initial process of setting up a deal is complete, your investment banker will offer shares in your company to institutional investors first. If you are working with a “boutique” firm, they will most likely not have as much access as larger firm, which is another factor to consider in your decision-making process.
Taking a company public is a big step and is not one that should be taken lightly. Finding the right partner for this endeavor is one of most important aspects of building a young company. At BrokerDealer.com we can connect you with the people you need to connect with, so come join us and see how we can help you grow.