Going public: What you should know. Going public: What you should know. Michael Hartley Guy Gross Robert Wild Brett Paschke

Transcription

1 July 29, 2010 Today s presenters Michael Hartley Guy Gross Robert Wild Brett Paschke Audit Partner, McGladrey & Pullen, LLP Audit Partner, McGladrey & Pullen, LLP Corporate and Securities Partner, Katten Muchin Rosenman LLP Head of Equity Capital Markets: Corporate Finance, William Blair & Company 1 1

2 Today s agenda Overview of the U.S. IPO Market Presented by Mike Hartley, McGladrey & Pullen, LLP Underwriters view Key accounting and audit issues Disclosure documents and post-ipo SEC reporting / governance matters Audience Q&A Please submit your questions at any time. We will address as many as we can at the end of the presentation. 2 Today s agenda Overview of the U.S. IPO Market Underwriters view Presented by Brett Paschke, William Blair & Company Key accounting and audit issues Disclosure documents and post-ipo SEC reporting / governance matters Audience Q&A Please submit your questions at any time. We will address as many as we can at the end of the presentation. 3 2

3 Recent Volatility has Investors Looking for Quality Brett Paschke, William Blair & Company $20 $0 ($20) ($40) ($60) ($80) Cash Beginning to Move Out of Money Markets ($ in trillions) 3,000 2,500 2,000 1,500 1, and into Equity Funds ($ in billions) (Index Value) $4.5 70% $4.0 60% $3.5 $3.0 50% $2.5 40% $2.0 30% $1.5 $1.0 20% $0.5 10% $0.0 0% Monthly Inflows to Stock Mutual Funds NASDAQ Composite Asset Volume Assets as % of S&P 500 Market Cap Volatility Index Source: Equidesk, ICI Research and Fact Set. Data as of July 11, Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun LTM Equity Index Performance 90 07/ / / / / /2010 DJ Industrial Average (24.62%) NASDAQ Composite Index (25.33%) S&P 500 (22.12%) Russell 2000 (31.33%) 4 as the Current Backlog Continues to Build Brett Paschke, William Blair & Company IPOs Filed Monthly IPO Backlog IPOs Priced Annually IPOs Priced Monthly Source: Equidesk. Data as of July 11, Data does not include REITs, Closed End Funds, and SPACs. 5 3

4 What is the Ideal Candidate? Brett Paschke, William Blair & Company Strong Business Solid Financials Market opportunity Predictable revenues Leadership in field Value added products or services Superb Management Attractive margins Strong cash flow Diversification Quality products or services Pricing power Leadership and execution Access to capital Conservative accounting Earnings growth Ability to re-invent Clear vision Common goals with shareholders Enthusiastic corporate culture Significant equity ownership 6 IPO Characteristics & Considerations Brett Paschke, William Blair & Company IPOs Priced LTM: Percentage of Company Sold Market Cap at Offering 80% 100% 1.6% 60% 80% 0% 20% 4.1% 40% 60% 16.4% 20.4% 57.6% >5.0B 1.5B 5.0B 2% 16% 750M 1.5B 16% <150M 14% 150M 300M 15% 37% 20% 40% 300M 750M Median $ Raised (MM): $140.6 Median Market Cap (MM): $440.8 Source: Equidesk. Data as of 6/30/2010. Implied market capitalization at initial filing based upon midpoint of initial filing range. 7 4

5 Small Cap Companies Dominate U.S. Exchanges Brett Paschke, William Blair & Company NASDAQ 52.3% % of Companies 15.6% 7.6% 5.0% 2.8% 6.6% 4.0% 2.3% 1.2% 0.6% 0.3% 0.3% < $200M $200M - $400M $400M - $600M $600M - $800M $800M - $1.0BN $1.0BN - $2.0BN $2.0BN - $4.0BN $4.0BN - $8.0BN $8.0BN - $16.0BN $16.0BN - $32.0BN - > $64BN $32.0BN $64.0BN As of July 1, Source: CapitalIQ Less than $1 billion market cap companies are a majority of companies on U.S. Exchanges: 83% of NASDAQ 46% of the NYSE However, they represent only a small fraction of the total market cap of those exchanges: 13.7% of NASDAQ 2.5% of the NYSE 8 Today s agenda Overview of the U.S. IPO Market Underwriters view Key accounting and audit issues Presented by Guy Gross, McGladrey & Pullen, LLP Disclosure documents and post-ipo SEC reporting / governance matters Audience Q&A Please submit your questions at any time. We will address as many as we can at the end of the presentation. 9 5

6 Key Accounting & Auditing Considerations Guy Gross, McGladrey & Pullen, LLP Determination of financial information to be included in the registration statement Review procedures performed on all quarterly numbers PCAOB v. AICPA audit standards Heightened risk level Other auditors Comfort letter process 10 Complications of the IPO Process Guy Gross, McGladrey & Pullen, LLP Quarterly data Business combinations - Significance test - Audit history - Carve-out audits - Proforma information Maintaining independence Practical timeline 11 6

7 Typical Accounting/Reporting Issues Guy Gross, McGladrey & Pullen, LLP Share-based compensation and fair value - Cheap stock Income taxes Public company only disclosures - Segment reporting - Earnings per share 12 Today s agenda Overview of the U.S. IPO Market Underwriters view Key accounting and audit issues Disclosure documents and post-ipo SEC reporting / governance matters Presented by Bob Wild, Katten Muchin Rosenman LLP Audience Q&A Please submit your questions at any time. We will address as many as we can at the end of the presentation. 13 7

8 The Goal Bob Wild, Katten Muchin Rosenman LLP Successful IPO Effective Corporate Governance and Compliance with Stock Market Listing Requirements Compliant On-going SEC Reporting and Public Disclosures 14 The Goal Executing the Successful IPO Bob Wild, Katten Muchin Rosenman LLP Final Prospectus - Selected Disclosures Risk Factors Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Business (competition and applicable regulatory framework) Corporate Governance Compensation - detailed charts and Compensation Discussion and Analysis (CD&A) Related Party Transactions 15 8

9 The Goal Executing the Successful IPO Bob Wild, Katten Muchin Rosenman LLP Amendment of certificate of incorporation and bylaws as necessary for public company provisions Amendment or adoption of compensation arrangements and equity plans Modification/elimination of related party agreements Comprehensive legal due diligence Managing public disclosures 16 The Goal Creating the Foundation for Effective Corporate Governance Bob Wild, Katten Muchin Rosenman LLP Director independence requirements Board Committee requirements Code of Ethics, Whistleblower Policies and Corporate Governance Policies Dodd-Frank Wall Street Reform and Consumer Protection Act -- governance provisions on the horizon 17 9

10 The Goal Implementing the Framework for On-going SEC Reporting and Public Disclosures Bob Wild, Katten Muchin Rosenman LLP Periodic Reporting Form 10-Q, Form 10-K, Proxy statement Current Reporting and public disclosures Form 8-K, press releases and investor presentations Internal Control over Financial Reporting Disclosure Controls and Procedures CEO and CFO certifications 18 Today s agenda Overview of the U.S. IPO Market Underwriters view Key accounting and audit issues Disclosure documents and post-ipo SEC reporting / governance matters Audience Q&A We will now answer your questions. Please submit any additional questions you may have at this time

11 Who to contact Michael Hartley McGladrey & Pullen, LLP T E michael.hartley@mcgladrey.com Guy Gross McGladrey & Pullen, LLP T E guy.gross@mcgladrey.com Robert Wild Katten Muchin Rosenman LLP T E robert.wild@kattenlaw.com Brett Paschke William Blair & Company T E bpaschke@williamblair.com 20 Thank you McGladrey & Pullen is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, Website: Katten Muchin Rosenman LLP has been certified by the New York State Continuing Legal Education Board as an Accredited Provider of continuing legal education in the State of New York for the period January 1, 2008, through December 31,2010. This seminar is appropriate for experienced attorneys. Attendees will receive 1 CLE credit in Professional Practice. Katten Muchin Rosenman LLP is an accredited provider of MCLE in Illinois. This program has been approved by the Illinois MCLE Board for 1.25 hours of General Credit. Katten Muchin Rosenman LLP is a State Bar of California approved provider of MCLE. This course has been approved for 1.25 General MCLE credits. William Blair Disclosure This is for informational purposes p only and does not in any sense constitute a solicitation or offer of the purchase or sale of securities that may be referenced herein, except where an offer is explicitly made through the availability of a prospectus on the site. The factual statements herein have been taken from sources we believe to be reliable, but such statements are made without any representation as to accuracy or completeness or otherwise. Prices shown are approximate and may change without notice. This is published in the United States and is not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be contrary to local law or regulation