Executives of Pre-IPO Companies

Go Public with the The IPO Vital Signs System which puts you in control of the IPO process, making going public faster, cheaper, and more rewarding.

“The IPO Vital Sign System will change how companies go public,

by introducing new transparency to this opaque process.”

Select the IPO underwriting team that will get the job done, based on our proprietary IPO investment banking ranking system that measures withdrawals v. pricings. Although the number of IPOs that an investment bank has led is important, the key question is: how many IPO registrations that have been filed have realized money, not disappointments. IPO Vital Sign #868 & 869 discloses the truth about the IPO batting averages of investment banks.

Which underwriters are IPO leaders? For unbiased, accurate, up-to-the minute leadership rankings of lead managers, see IPO Vital Signs #175; for co-managers see IPO Vital Sign #178; for syndicate members, see IPO Vital Sign #181. And for a long term view of each of over 500 investment banks on a combined IPO basis, see IPO Vital Sign #172.

Which investment banks have the industry experience you need to take your company public? The sector activity of IPO lead managers can be analyzed at IPO Vital Sign #106; IPO co-managers at IPO Vital Sign #109; and syndicate members at IPO Vital Signs #112.

Which investment banks have been active as IPO lead managers and IPO co-managers over the last six years? See IPO Vital Signs #688 and 692 for the investment banks involved in more than 1,550 IPOs since 1/1/98.

Which lead managers and co-managers that you are considering to underwrite your company have worked together in the past? See the IPO working group relationship at IPO Vital Sign #228.

How many IPO co-managers are too many? In 2003, the range has been from one to five co-managers, with four IPOs skipping co-managers completely. Review IPO Vital Sign #466 for the definitive overview of co-managers in the IPO process.

What should your IPO offering amount be? For a definitive overview of IPO offering amounts, see IPO Vital Sign #430. Offer amounts for firm IPO underwritings in 2003 have ranged from $9 million to $1.4 billion. The most intense competition for IPOs is in the range of $50-$250 million because the majors, sub-majors, regionals, and boutiques are all comfortable at this IPO offering level. Drill down on your desired offering segment and compare the IPO offerors in that group to your company.

What market capitalization should you shoot for? The higher the better, of course, because some institutional investors have market cap minimums to enhance the likelihood of liquidity when it comes time to sell their IPO investments. Analyze IPO companies that have gone public with market caps similar to your goal by reviewing IPO Vital Sign #434.

What will be the pricing factors considered by the investment bankers in valuing your IPO? For a list of the factors for each IPO in your SIC, see IPO Vital Sign #751 and then rank on the SIC Code.

What is the final pricing v initial filing pricing record of your proposed lead manager? Check the definitive overview at IPO Vital Sign #446. Then see the offering policies of IPO lead managers at IPO Vital Signs #844 and #845. For final pricing v midpoint of initial filing range, see IPO Vital Signs #750, #840 and #841.

What are the recent price-to-revenue multiples granted by IPO underwriters you are considering? For the price-to-revenue offering policies of IPO lead managers, see IPO Vital Sign #852 (summarized by investment bank) and use IPO Vital Sign #853 to rank the price-to-revenue multiple of IPO issuers by lead manager, SIC, revenues, IPO deal size, and headquarters.

How much will your insiders have to give up when your company goes public? See IPO Vital Sign #753 to get a sense for what the average price per share has been that insiders paid at the time their company went public. IPO Vital Sign #860 lists IPO lead managers in terms of the average dilution to insiders, a key pricing derivative to consider when selecting an IPO lead manager.

What dilution will public shareholders put up with? More than you might imagine! Would you guess that since 1/1/01 the average and the median dilution that new IPO shareholders have bought into is around 70%? To see what kind of dilution new IPO investors absorb in IPOs similar to yours, see the definitive overview at IPO Vital Sign #450. The good news for insiders is that for half the reporting IPOs, the price per share paid for insider stock was less than two bucks (see IPO Vital sign #454). The corollary is that the net tangible book value per share after an IPO is low (see IPO Vital Sign #452).

Negotiate for an underwriting discount of less than 7%. Most companies think they are stuck with the 7% discount. See IPO Vital Signs #394 and #643 for the companies that have been able to negotiate a lesser percentage and note the discount policies of IPO lead managers in IPO Vital Signs #863 and #864.

The over-allotment option takes the risk out of the underwriting for the investment banks. Do all companies grant an overallotment option to their syndicate? See IPO Vital Sign #483 for a definitive overview and IPO Vital Sign # 794 for each IPO issuer’s option grant since 1/1/98.

Can insiders sell in the IPO offering? This should always be a condition of the offering as submitted to your prospective lead managers. Thirty percent of all IPOs since 1/1/01 have offered secondary shares (shares owned by insiders), so don’t be bashful. For a definitive overview of primary and secondary share offerings in IPOs, see IPO Vital Sign #447 and for the primary/secondary split on each of more than 1550 IPOs since 1/1/98, see IPO Vital Sign #716. Remember that insiders do sell shares in IPOs, even though the myth is that they never can. IPO Vital Signs #848 and #849 will show you the underwriters that have granted insiders the right to sell in the offering.

“Remember that the IPO Deal is negotiable until you sign the Underwriting Agreements the night before your company’s stock begins to trade.”

Your long term shareholders don’t want to agree to an IPO lock-up. Of course not, yet most companies get their insiders to sign up for a 180 day incarceration of their shares. But some companies (about one out of 10 since 1/1/01) have been able to get their shareholders a special deal, called a multiple lock-up which lets some shareholders sell in less than 180 days. See IPO Vital Sign #480 for the definitive overview of IPO lock-ups and then click on IPO Vital Sign #787 to zero in on the IPO lock-up practice of the IPO underwriters you are considering, as well as ranking on SIC code, offering amount, and revenues to support your arguments.

Bail out using the IPO Green Shoe instead of waiting for the end of the lock-up. IPO Vital Signs #484 and #793 tell you which investment banks have accepted overallotment options from insiders. If insiders can sell all the shares in a typical overallotment option, in a $50 million deal they would be able to sell shares worth $7,500,000.

How big can you make your IPO directed share program? Some underwriters have gone as high as 10%. For a definitive overview of directed share programs, see IPO Vital Sign #486. See IPO Vital Signs #866 and #867 for the offering policies of all the lead managers. Check out IPO Vital Sign #795 for the prospectus disclosures you will need.

Does the IPO stock price per share matter? Not really, because it is the entity value of your company that is decisive for your shareholders. But each investment bank has its favorite stock price range, which can be determined by ranking the data in IPO Vital Sign #438 by investment banker and noting their offering prices per share.

What IPO filing spread can you expect? The spread between the low and the high filing prices is usually $2, but it will depend on the price per share at which the offering is expected to be priced. See IPO Vital Sign #442 for a definitive overview of initial IPO filing price spreads.

Is your law firm an IPO leader? For your law firm’s six year record representing IPO issuers, analyze IPO Vital Sign #164; as IPO underwriters' law firm, check out IPO Vital Sign #168; and on a combined basis, see IPO Vital Sign #160.

Evaluate the industry sector and SIC experience of the IPO law firms that you may retain for your IPO. An IPO is no time for your professionals to go to graduate school at your expense. Review IPO Vital Sign #100 for your law firm’s industry and SIC experience.

The IPO law firm selection process should include all the law firms in your area that have taken companies public, including branch offices of firms headquartered elsewhere. See IPO Vital Signs #270, #274, and #278 as well as IPO Vital Signs #680 and #684 for the IPO activity of law firms in your area, and consider active IPO branch offices as well as IPO law firms with headquarters in your city.

When do law firms get equity in IPO companies? Some of the law firms you are considering may want stock or options as part of their fee or want to invest in an early or late round with the VCs. For a definitive overview of equity for counsel, see IPO Vital Sign #492. See IPO Vital Signs #801 for all examples of such equity participations.

Compare your IPO law firm’s fee estimates with fees charged by them for other IPO clients. Check out IPO Vital Signs #398 and #647 for legal fees for each IPO over the last five years, and then analyze the fees in terms of SIC, financial profile, and lead manager.

Evaluate your individual IPO lawyers. Your law firm may be experienced, but how about the lawyers assigned to your IPO? Compare the longterm record with recent experience for each lawyer that will represent your interests when your company goes public, as IPO issuer’s lawyer (IPO Vital Sign #165); as IPO underwriters' lawyer; and on a combined basis (IPO Vital Sign #161).

“Your IPO Law Firm is Your Key Adviser and Advocate. It’s No Time for OJT.”

Is there an inherent conflict of interest for the law firm you are considering (or have already retained)? Has the law firm represented more than its fair share of underwriters? IPO Vital Signs #160 and IPO Vital Sign #168 will spell it all out in an up-to-date, independent, and authoritative manner. Is such experience really a boon? For a close look at IPO working group relations between IPO lead managers and IPO issuer’s law firms, see IPO Vital Signs #220, and for IPO lead managers and IPO underwriters’ law firms, see IPO Vital Signs #224.

Consider the underwriters’ law firm. Does the firm understand your space? See IPO Vital Sign #103 for up-to-date information on the industry sector and SIC experience of your IPO syndicate’s law firm. Don’t let inexperienced underwriters’ counsel learn on your IPO.

Blue Sky fees are all over the map. Count on IPO Vital Sign #410 for the full range of fees, and establish the fee as part of the IPO Deal.

Can you count on your accountants? Where does your auditing firm stand in terms of overall IPO experience? For a six year and current record see IPO Vital Signs #184 and #704.

And for industry experience, the key ingredient in an audit firm selection process, see IPO Vital Sign #115.

Your prospective IPO audit firm’s branch office will be doing the actual accounting. The league tables may look great for the firm as a whole, but what is the IPO experience of your branch office? Study IPO Vital Sign #282 for an exhaustive analysis of the IPO activity of every audit branch since 1/1/98.

Have your audit firm and law firm worked together on IPOs? See the IPO working group relationships in IPO Vital Sign #232.

Is your auditor’s report in line with that of other companies going public? See IPO Vital Sign #810 and then Compare!

Your auditor is talking about a “going concern” report. They say it won’t affect our chances of going public. See IPO Vital Sign # 807 for companies that had a successful IPO in spite of a “going concern” audit report.

You want to switch auditors before the IPO. Can a company go public after it has switched auditors? See IPO Vital Sign #496 for the definitive overview of IPO auditor switching. What kind of disclosure will be needed in the prospectus if you do switch? See IPO Vital Sign #807 and Compare!

How much will your IPO audit fees be? In a word: high. For a definitive overview, see IPO Vital #402, which will also give you the median and average for the periods selected. Then review IPO Vital Sign #651 for the audit fees that have been paid by over 1,550 IPOs, and compare the estimates you have received with the fees actually paid by IPOs similar to yours, in terms of SIC code, revenues, etc.

Select your IPO service providers. Stock exchange, Financial printer, Transfer agent, D&O insurance agent and underwriter, Investor relations advisor, Cash management services, Governance Advisor; start the process early to save money and avoid last minute decisions.

On which exchange should you list your IPO shares? Nasdaq gets the most IPO listings, but NYSE gets the IPOs with the largest offerings. Check in with IPO Vital Signs #470 and #718 to analyze which exchanges were selected by companies most like yours.

Which IPO transfer agents should you choose for those critical post IPO duties? For industry experience, consult IPO Vital Sign #118, and for leadership rankings, review IPO Vital Sign #187.

IPO transfer agents are often recommended by issuer’s counsel. Does my law firm have a special relationship with any transfer agents? See IPO working group relationships at IPO Vital Sign #236.

How much will transfer fees run? Not much at the time of the IPO (see IPO Vital Signs #404 and #655), but the trading activity after the IPO will determine the real costs, so it pays to get at least three bids from the firms listed in IPO Vital Sign #187.

Evaluate your proposed IPO teams by their past record with companies with your SIC number (IPO Vital Sign #573), your proposed offer amount (IPO Vital Sign #708), your proposed market capitalization (IPO Vital Sign #710), and by the revenue, net income, and net worth of companies they have taken public in the past (IPO Vital Signs # 585, #589, and #593).

Have there been any recent IPOs in your industry sector? Check out IPO Vital Signs #320 and #324 and analyze the companies in your industry sector and Standard Industrial Classification that have gone public over the last six years. Check out IPO Market News for similar companies that are in registration (IPO Vital Sign #1003, the IPO Queue).

Contact CEOs and CFOs of companies that have recently gone public in your area or your industry. Review IPO Vital Sign #328 to identify companies in your state and check out IPO Vital Sign #577 to rank IPO issuer’s in your state and industry. Then use IPO Vital Sign # 770 to identify the names of all officers (including CEOs and CFOs) and directors of those companies you wish to contact.

What revenues are required of companies going public now? See IPO Vital Sign #340 for revenues of companies that have gone public and IPO Vital Sign #1003 for revenues of companies in the IPO Queue.

Can you go public with a loss in today’s new IPO market? See IPO Vital Sign #344 and the IPO Queue at IPO Vital Sign #1003.

Is a positive net worth needed in the new IPO market? See IPO Vital Sign #346 for a segmented view of the net worth of recent IPOs and check out the IPO Queue at IPO Vital Sign #1003 for the net worth of companies in registration.

What is the financial profile of companies similar to yours that have gone public in any recent period? Review IPO Vital Sign #581 for the comprehensive financial facts.

Your company has great prospects but has only a few employees. So can you go public? Twenty percent of all IPOs since 1/1/01 have had 100 employees or less. See IPO Vital Signs #456 and #765 to compare your company’s employment with those of companies in industries similar to yours.

Is it true that unionized companies can’t go public? Slightly more than 20% of all IPO companies since 1/1/01 have had collective bargaining agreements. See IPO Vital Sign #457 to see if IPO companies in your line of business had bargaining agreements.

Your company has just been sued. Can you still go public? Join the line of litigants: About 40% of all companies that went public since 1/1/01 have reported litigation in their prospectuses. See IPO Vital Sign #458 for a definitive overview of legal proceedings affecting IPO companies and then zero in on IPO Vital Sign #766 for specific types of litigation.

Should you reincorporate in Delaware? Your law firm may want you to incorporate in Delaware. IPO Vital Signs #332 and #579 will give you the facts on which IPOs are formed in Delaware v. your headquarters state.

What security should your company offer in its IPO? Although most IPO companies issue a single class of common stock, there are 12 other types of securities that have been offered since 1/1/01. If you are considering classes of shares to protect the interests of your insiders, see IPO Vital Sign #462 for the companies that have offered them. IPO Vital Sign #782 can be arranged by SIC code to determine which companies in your industry offered various types of securities.

How many common and preferred shares should you authorize? This is the last time you can authorize shares without visiting your public shareholders for a vote. Authorizing 100,000,000 shares is not uncommon. See IPO Vital Sign #463 for the definitive overview of IPO common and preferred share authorizations prior to the IPO. IPO Vital Sign #783 will help you zero in on the number of shares authorized, ranked by SIC code, number of shares offered, IPO offer amount, IPO market cap, and revenues.

What size Board of Directors should a company like yours have when it goes public? Seven or eight has been the median/average for companies that went public since 1/1/01. Sarbanes will have an effect on your decision. To get a definitive overview of how many directors companies with your characteristics have, review IPO Vital Signs #460.

Identify experienced IPO directors as prospects for your company’s board of directors. Looking for experienced IPO directors close to home? Go to IPO Vital Sign #328 to find companies in your state that have gone public over the past six years, then identify the IPO directors of those companies by reviewing them at IPO Vital Sign #770. Looking for industry experts in your area? Check out IPO Vital Sign #577, then get the names of the directors you want to contact from IPO Vital Sign #770.

Should your independent directors be paid in cash, equity, or both when you go public? Over half the IPO companies since 1/1/01 have paid out both types of compensation to their directors. See IPO Vital Sign #461 for the definitive overview of compensation for IPO independent directors, and check out IPO Vital Sign #772 for the type of compensation by industry, revenues, and deal size.

Will you need to pay dividends after you go public? Although dividends are becoming more frequent in IPOs for many reasons (size of company, cash flow, tax reduction), they still tend to be in the minority (15% or so). See IPO Vital Sign #448 for a definitive overview of IPO dividend policy before and after the IPOs, and IPO Vital Sign #746 for the dividend policy of recent IPOs.

Should you hire an inside legal counsel as well as use an outside law firm to represent your company in its IPO? You may want to consider it. Four out of ten IPO companies that have gone public in the past three years have had a general counsel when they went public. See IPO Vital Sign #459 for a definitive overview of the use of general counsel by IPO companies.

Identify inside legal counsel prospects by getting the name, age, address, telephone number for the chief legal officer at IPO Vital Sign #771. Want an inside legal counsel with experience in your industry? Rank them by SIC code.

How much will it cost to go public? It is an expensive party. For the current and historical out-of-pocket costs, see IPO Vital Signs #390, which will show you IPO expenses on a segmented basis and the average and median for the period covered. IPO Vital Signs #635 provides you with expenses for each of more than 1550 IPOs. For a look at aggregate costs of IPO capital (discount plus out-of-pockets), see IPO Vital Signs #392 and #639.

What type of IPO expenses can you expect? IPO Vital Sign #391 lists the types of expenses that may be incurred in going public and the percent of companies which have disclosed each type of IPO expense.

What are the specific IPO expenses we should plan on? For IPO legal fees, see IPO Vital Signs #398 and #647. For IPO audit fees, see IPO Vital Signs #402 and #651. For IPO transfer agent fees, see IPO Vital Signs #404 and #655. For IPO printing fees, see IPO Vital Signs #406 and #657. For a limited number of D&O insurance fees, see IPO Vital Signs #408 and 659. For IPO Blue Sky fees, see IPO Vital Signs #410 and #662. For “miscellaneous” IPO fees, which can be significant, see IPO Vital Signs #412 and # 665.

Save $100,000-$300,000 and more in IPO expenses by setting caps based on expenses paid by IPOs similar to yours.

How can we control our printing expenses? After reviewing the definitive overview of IPO financial printing (IPO Vital Sign #406) and examining the actual printing fees paid by companies similar to yours (IPO Vital Sign # 657), call CFOs of IPO companies that are similar to yours in terms of industry sector and related factors and ask for tips on how to control printing expenses and keep them below the 2003 average of more than $400,000 and nearer the median of $250,000.

D&O insurance can be expensive. Although the data is anecdotal, the average fee disclosed since 1/1/01 of $750,000 (see IPO Vital Sign #408) warrants plenty of competition from the brokers.

When should you start planning for your company’s IPO? Dozens of CFOs of IPOs that have gone public told us you can never begin early enough. There is always more to do than expected. And never enough time at the end.

How long will your IPO be stuck in registration? The time that companies are in registration depends on a number of factors. The SEC is processing them more quickly than during the bubble. See IPO Vital Sign #474 for a definitive overview and IPO Vital Sign #717 for the six year record issuer-by-issuer. Check out IPO Vital Signs #856 and #858 for the IPO underwriters’ records in this critical area.

Keep up-to-date on IPO activity. Subscribers to the IPO Vital Signs System receive IPO Week each Monday via email.

Check the current status of the IPO market. Click on IPO News. All IPO filings are listed at IPO Vital Sign #1000; IPO offerings are at IPO Vital Sign #1001; Withdrawals are at IPO Vital Sign #1002. The IPO Queue, which lists data on all IPOs currently waiting to go public, can be found at IPO Vital Sign #1003. Check the SIC numbers to get a reading on companies in your industry sector.

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