What’s Involved in Filing the Registration Statement with the SEC?
As I mentioned in last week’s blog, filing with the SEC is a time-intensive process. From documenting the company’s history to providing a business plan and sharing information on how you intend to achieve those goals, you will spend a great deal of time answering the question, "Why should the public invest in this company?" You also need to discuss all of the things that could possibly go wrong with their investment in your company. For example, if you do business internationally, there may be more risk than if you just did business domestically.
Let’s look at an example from the recent Twitter SEC filing document. The table of contents is short but the document is 260 pages. Besides listing general company information and how many shares will be sold, there are 33 pages devoted to ‘Risk Factors’ and 14 pages on ‘Executive Compensation.’ Executive compensation is a controversial topic, and you'll need to be able to deal with the fact that the world will now be able to see your company's actual numbers. Other items in the Twitter filing, which you will also have to document, include how the proceeds from the selling of shares will be used and what ‘Factors Affect Future Performance.’ Your lawyer or accountant can provide you with sample SEC filing documents so you can understand the scope of the process.
Once the document is audited and filed with the SEC, the job is not over. The SEC will review the document and there will most likely be several rounds of comment letters, which could contain upwards of 50 or more questions. Some of the comments are asking for clarification or further elaboration on a topic but there will also be errors that will need to be fixed.
As I discussed last week, it is very important to be mentally prepared for the amount of time it takes to file the registration documentation with the SEC. Surrounding yourself with a knowledgeable support group will hopefully make this process go more smoothly.
Next week’s blog will look at what’s expected of your newly registered public company after the IPO. We’ll cover some of the required legal obligations and other responsibilities moving forward.