NYSE IPO Guide

NYSE IPO Guide

1

Why go public?

1.1 Advantages of conducting an IPO
J.P. Morgan (Investment Banking)
When considering an initial public offering 
(IPO), a company should evaluate the 
associated pros and cons, as well as 
the motivations for going public. This 
evaluation process is best conducted in 
conjunction with an investment bank, 
which can assist the company in working 
through the salient issues. There are 
numerous advantages to going public, the 
most pertinent of which are detailed below.
(a) Access to capital 
The most common reasons for going public 
are to raise primary capital to provide the 
company with working capital to fund 
organic growth, to repay debt or to fund 
acquisitions. Further direct results include 
the following:
• Once the company is public, it has 
access to an entirely new, deep and 
liquid source of capital for any future 
needs it may have.
• Being publicly traded adds equity 
to the company’s capital-raising 
toolkit, enabling the company to 
achieve and maintain an optimal 
capital structure.
• Following the IPO, the company will 
be able to tap the equity markets via 
follow-on offerings of primary and/
or secondary shares, or a mix thereof. 
After the company has been public for 
one year, it will be eligible to access the 
equity capital markets on demand via a 
shelf registration statement.
(b) Liquidity event 
Listing on the NYSE has numerous 
benefits, not only for the company but 
also for its shareholders. The IPO can be 
structured such that existing owners of 
the company can sell down their position 
and receive proceeds for their shares. In 
addition, once the company is public, the 
existing owners have a public marketplace 
through which they can monetize their 
holdings in a straightforward and orderly 
fashion.
(c) Branding event and prestige 
By listing on the NYSE, the company will 
receive worldwide media coverage through 
the financial markets, which provide 

constant live coverage on publicly traded 
companies. In addition, research analysts 
at broker-dealers will begin to write 
reports on the stock and the company, thus 
raising the profile of the company. Broader 
coverage across various sources will likely 
enhance the company’s visibility, increase 
its stature with actual and potential 
customers and suppliers and thus help 
it grow its market share and competitive 
position.
(d) Public currency for acquisitions 
Once the company is public, it can use its 
publicly tradable common stock in whole 
or in part to acquire other public or private 
companies in conjunction with, or instead 
of, raising additional capital. Publicly 
tradable stock is clearly more attractive to 
target shareholders than illiquid private 
company stock. 
(e) Enhanced benefits for current 
employees
Stock-based compensation incentives 
align employees’ interests with those 
of the company. By allowing employees 
to benefit alongside the company’s 
financial success, these programs increase 
productivity and loyalty to the company 
and serve as a key selling mechanism 
when attracting top talent. Furthermore, 
issuing equity-based compensation 
will allow the company to attract top 
talent without incurring additional 
cash expenses. Being a public company 
provides employees with the ability to 
monetize the value of their stock-based 
compensation, whether it is options or 
restricted stock.
1.2 Potential issues
J.P. Morgan (Investment Banking)
While there are numerous advantages 
to going public, there are also a few 
considerations that the company, its 
management and shareholders should 
evaluate prior to embarking on the 
IPO process. The most successful 
companies with the smoothest IPO 
processes are those that fully weigh these 
considerations before embarking on an 
IPO and that begin making the necessary 
preparations months, if not years, 
beforehand.

(a) Loss of privacy and flexibility 
In order to comply with securities laws, 
public companies must disclose various 
forms of potentially sensitive information 
publicly, which regulatory agencies, as well 
as competitors, can then access. Private 
companies can operate without disclosing 
proprietary information in a public forum. 
In addition, the focus of research analysts 
and the investor community on quarterly 
results and stock price performance 
may have the effect of constraining the 
operational flexibility enjoyed by the 
management of a private company.
(b) Regulatory requirements and 
potential liability 
Correspondingly, public companies must 
regularly file various reports with the 
Securities and Exchange Commission 
(SEC) and other regulators. In order to 
comply with disclosure requirements, 
companies often need to completely 
revamp or expand their existing 
documentation policies, which can be 
costly and time-consuming. In addition, 
directors and officers are potentially 
liable for potential misstatements and 
omissions in the registration statement 
and in the company’s ongoing reporting 
under the Securities Exchange Act of 1934 
(the Exchange Act).
(c) Sarbanes-Oxley 
The Sarbanes-Oxley Act was passed 
in 2002 as a reaction to a number of 
major corporate and accounting 
scandals, which cost investors billions 
of dollars and shook public confidence 
in the nation’s securities markets. 
SOX set new standards for public 
companies, including requirements 
relating to accounting, corporate 
governance, internal controls and 
enhanced financial disclosure. SOX 
compliance can be a time-consuming 
and costly process for a newly public 
company. Although the JOBS Act relieves 
emerging growth companies (EGCs) of 
the obligation to have their independent 
auditors provide an attestation on internal 
controls under Section 404(b), they are 
still required to put in place internal 
controls sufficient for management to 
provide the certifications required by 
Section 404(a)

NYSE IPO Guide