After IPO, What’s Next for a Public Company?
January 09, 2014
By Marc Fogarty, CPA, CFE
After the Initial Public Offering, every move the company makes is visible and under public scrutiny. The company’s owners will need to answer to a lot of people: shareholders, board of directors, auditors and more, as well as meeting time-consuming legal obligations. Being prepared will help you keep cool despite the heat.
Now, more than ever, the company’s owners need to be careful how they represent their company in all correspondence and in the media. There will be shareholder conference calls and other media events where people can ask any question they want and a CEO or CFO will be pressed to answer on the spot. You will need to take your time in responding and choose your words carefully. Like a politician, it is important to be accurate in a response because that response is now part of the public record. Analysts will listen quite intently, take notes and call you on an incorrect statement.
Another consideration is being prepared for the legal obligations that come with the public company status. For example, a Form 8-K is now required for any significant information released to the public. This document lets shareholders and the SEC know what’s going on within a company such as lawsuits, management additions and departures, quarterly performances and more.
There are also required financial documents which can be quite time consuming and will need staff resources allocated to the task. A large company might need to work closely with their accountants nine months out of the year; even smaller public companies can expect an average of six months out of the year. For example, the annual filing of Form 10-K gives a comprehensive company performance summary including audited financial statements. Form 10-Q is filed quarterly and, even though the information is generally less detailed and the financial statements are unaudited, it still takes a significant amount of time.
These are just a few examples of the legal responsibilities and reporting obligations that come with being a public company. You will need to speak with your lawyers and accountants to get a better understanding of the full scope of information and obligations required of your specific company.
As mentioned in other blogs in this series, being prepared is paramount. When you are mentally prepared for the challenge and you know what lies ahead, you will spend less time being surprised and more time focused on the tasks at hand.
Next week’s blog will examine why a company might be motivated to reverse the decision and go from a public company to a private company.