The three steps to going public.

• Author: Rogers, Robert K.
• Position: Going public with company stocks

THE THREE STEPS TO GOING PUBLIC

Of two Harvard Business School graduates, one graduated in the top of the class and retired from a lowly position in his company. The second, at the bottom of the class, retired a millionaire. When asked the secret of his success, the latter said: "It's very simple. I buy at $2 and sell at $5. It's amazing how much money I make with a $3 mark-up!"

When a company performs well or has a high likelihood of performing well in the future, the shareholders may be able to enjoy a substantial "mark-up" in the value of their shares through an initial public offering. When successfully completed, the "going public" process not only raises needed capital for the company's growth and operations but allows the company's shares sold to the public to be freely traded.

The three steps to going public are:

Due Diligence and Writing the Registration

The four- to six-month process of going public centers around the preparation of a registration statement to be filed with the Securities and Exchange Commission. The process begins with the critical organizational meeting of the players, including the president and the chief financial officer of the company going public, company legal counsel, the underwriter, underwriter's legal counsel, and the company's auditors. At this organizational meeting, a preliminary time schedule for the entire public-offering process is established and parts are appropriately assigned to each of the players. During this meeting, the players discuss such details as the business of the company, its current financial statements, and management's analysis of the company's financial performance. Company counsel and the underwriter and its counsel carefully plan the investigation or "due diligence" of the company and request any information or documents needed from the company. This due diligence is the foundation upon which all information disclosed to the public is based. The organizational meeting also includes discussion of the publicity policy to be followed prior to and during the public offering and evaluation of any disclosure, accounting, or legal issues expected to arise. Company counsel distributes a detailed questionnaire for the officers and directors of the company to solicit from them information needed for the registration statement.

After the organizational meeting, company counsel and the underwriter pursue the due diligence examination of the company and prepare the first draft of the...