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Tag: IPO

Businessman diving into a pile of cash with a bottle of champagne in hand.

Success! – The Waterfall of Cash at the End of the IPO

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On February 24, 2026

In CFO, Investor Relations, Working With Investment Banks

In my last blog entry on IPOs, the process had reached the successful end of the roadshow, and the banks were now prepared to offer you the deal.

This is the step where the final price is set and where the initial allocation of shares is done. There can be some movement in the share price compared to the original range announced at the launch of the roadshow. If the change is within a 10% band of that indicative pricing, you can proceed with pricing without needing to refile.

If demand is strong enough to justify a price more than 10% above the original band, it ideally was identified early in the roadshow so the range could be adjusted and a new prospectus filed with the SEC. If the demand is very back-end loaded, you may be forced to delay pricing while the new filing is made. That delay — on top of the market signal that a price reset was needed — can outright kill the deal.

That is one reason deals are often cut in size if demand is lower than hoped. The delay combined with weak optics can be fatal.

When the banks (specifically the lead left bank) tell you the price and number of shares, they also give you their proposed allocation — how many shares and to which investors.

The first thing to point out is that the initial allocation includes the “greenshoe,” which is part of a standard IPO. This is normally 15% on top of the base deal size. The underwriters sell these shares short up front as part of the stabilization process.

I will get to stabilization and the greenshoe mechanics shortly, but the key point at this stage is that the order book must cover not only the base deal but the additional 15% as well.

You do get a say in the allocation.

For the most part, the ECM desk knows who is best to place the initial shares with and how many. This ties directly to how the stock is likely to trade when the IPO goes live. You need some trading to happen right away, so some shares need to be placed into accounts that will actually trade.

You should absolutely review the allocation carefully. It is fine to tweak it and move shares to certain investors that you favour, especially those you believe will be constructive long term holders. But you also need to trust the banks. They are in the market every day and know these accounts well.

All of this is calculated by the banks, and they present what they believe is the most reasonable structure to support successful aftermarket trading. Everyone wants to see the stock trade up after the IPO — that stamps the deal as a success out of the gate. A huge first-day jump generates good press, but too big a jump is money left on the table by the company.

The deal then goes to your Board of Directors — almost always to a pre-authorized pricing committee. You need a quick decision, and coordinating a full board in real time can be a logistical nightmare. A smaller group authorized in advance makes the process smoother.

The lead bank presents the final terms, there is discussion, and then a decision is made.

Sometimes demand is not quite where you hoped. The banks may propose a smaller deal, a lower price, or both. If this happens, you are in a very tough spot. A failed IPO can set you back quite a while. If you take a lower price or reduced size, it puts you on your heels from a momentum standpoint and makes early investor relations more challenging.

I lean toward taking a workable deal and fighting forward, but you cannot make that call in the abstract — you make it in the moment. I did not face that specific scenario as our IPO priced in the middle of the range.

The next morning, trading begins. Pricing is often Wednesday night and trading starts Thursday morning. Banks generally avoid Mondays and Fridays for a first trade.

Traditionally, this also gives the company the opportunity to “ring the opening bell.” It is essentially a staged PR event, but a meaningful one for the team. Because we did our IPO during COVID, we did not get to do it. If you can arrange it, I recommend it.

Hopefully trading starts well and the stock trades up. Every trading day brings outside news and market events, so not everything that happens will have anything to do with your company.

Enjoy your celebratory dinner with the banking teams and, if you drink, have something that night to mark the moment — just do not do anything foolish (really do not drink and drive).

Although the stock technically settles on standard T+1 timing, your underwriting agreement likely specifies settlement between T+2 and T+4. This is because the underwriters purchase the shares directly from the company, not through market trading.

On settlement day, you receive a wire transfer for the gross proceeds less underwriting fees and usually all professional fees agreed to be paid (both yours and certain bank expenses), plus travel and other deal-related costs that the banks advanced.

You will only receive proceeds for the shares sold by the company. Secondary shareholders who sold as part of the IPO receive their cash directly from the underwriters.

If your company receives primary proceeds, you should have a plan ready. In our case, a significant portion went toward paying down debt.

If the stock stays at or above the IPO price during the greenshoe period (typically 30 days), you will also receive proceeds from the additional 15% overallotment.

If the stock trades down and the stabilization agent buys shares in the open market to cover the short created at pricing, you may end up with less greenshoe exercised. That is normal. Stabilization is common. Roughly 20–30% of IPOs trade below the offering price on the first day, and 40–50% trade below it at some point in the first 30 days. We tend to remember the moonshots and forget the statistics.

The greenshoe exists to balance the overallotment and help manage those first few weeks of trading. A clean aftermarket makes life much easier for management and investor relations.

The final topic that is important to understand is the lock-up.

It is very common for underwriters to require a 180-day lock-up on the company and its officers. This is designed to prevent additional stock from coming to market too quickly and gives IPO investors some stability.

It also means management has to wait 180 days before selling any shares they own or have been granted.

The banks can waive lock-ups, and terms are negotiable, but 180 days is standard. I have had waivers granted before when the stock was trading well above the offering price and the transaction involved secondary shares, so it is possible — just not typical.

Enjoy the success.

And try not to drown in the pool of cash.

Runner dressed in an S-1 races to the finish line made of money.

Doing the IPO – Closing the Sale

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On February 17, 2026

In CFO, Investor Relations, Leadership, Working With Investment Banks

Up until the point where the underwriters give their nod and your lawyers tell the SEC to declare the S-1 effective, there has been a very large burden on your shoulders as the CFO. As important as the final sales push is, once you get to this stage most of the remaining work shifts away from you and onto the banks and, more importantly, to your boss — the CEO.

There are two activities that typically happen before the roadshow itself formally launches.

The first is any “wall crossing.” This is a process where the banks preview the deal with a small number of qualified institutional investors. It does not happen every time, but when it does, the goal is to gauge demand, see how well the marketing message resonates with the target audience, and infer valuation. Valuation is not supposed to be discussed explicitly, but both the banks and the investors involved know how to read and give signals.

Wall crossing usually happens before the S-1 is declared effective, but typically when it is close to ready. Other than the fact that these are often among the first presentations you will do — so you may not sound as polished yet — they are not materially different from the presentations you will give once the roadshow officially begins. If something has gone seriously wrong earlier in the preparation or underwriting process, an overwhelmingly negative reaction could stop the IPO. But if you are this far along, that really should not happen.

Even if you enjoy conspiracy theories and think the banks are just looking for a graceful exit, the reality is that the funds you are talking to do not have time for games. What you usually get instead is constructive feedback, some tightening of the pitch, and an early indication of how strong demand — and therefore valuation — might be.

The other common special presentation is the recorded version of the deck that can be shared with accounts where an in-person or live meeting cannot be scheduled, usually due to geography. Some investors will watch the recording simply to get the canned material out of the way so that they can spend their live meeting time asking questions and engaging with management. The banks almost always have a preferred vendor for this. Other than being prepared to be on camera, there is not much additional advice to give.

At the end of this phase, your Board will need to meet to formally accept or reject the banks’ offer, so that meeting needs to be scheduled in advance. Sometimes pricing authority is delegated to a committee, but for IPOs the full Board often votes.

Then your lawyers ping the SEC, the S-1 flips to effective, and you are officially off.

Well before this point you will have selected your lead bank — usually referred to as the “lead left” bank, which reflects their position in the underwriting syndicate. They are almost always the stabilization agent as well. You probably relied on an external advisory firm to help with this selection process.

Once chosen, the lead bank becomes the primary administrator of the IPO and controls the master order book. In my experience, they bring in the majority of the orders. The other banks generally make a good-faith effort, attend meetings, and provide advice, but because the lead controls the book, the investors they want to prioritize tend to take precedence.

Interestingly, I have found that smaller banks often punch above their weight. They tend to be hungrier and try harder, and it is not uncommon for them to deliver more orders than their share of the fees would suggest.

The IPO I worked on was during COVID, so it was conducted entirely over Zoom. Today, roadshows have largely shifted back to in-person meetings. Zoom is still used for geographically isolated investors, but many meetings now take place at investor offices or group venues, often over lunch. This reintroduces a meaningful amount of travel planning, which the banks will manage. Having done enough deal and non-deal roadshows in person, I have a healthy respect for the logistics.

My first piece of advice is to rest before it starts and stay away from alcohol during the roadshow. You will likely be changing time zones and dealing with jet lag. The less additional stress you put on your body, the better you will perform in meetings. You can have all the drinks you denied yourself once it is over.

Eat well. Stay hydrated. You will be talking a lot, and a raw throat will absolutely work against you. This is an important trip — or series of trips — and you need to stack the odds in your favor. Expect planes, cars, and possibly trains (New York to Boston). For larger IPOs, expect travel to Europe and a week or more on the road.

The second piece of advice is to be prepared to sit through many meetings where you say very little — but also be ready to carry the meeting if needed. You are the CFO, traveling with your CEO. A tremendous amount rested on your shoulders before the roadshow launched, but once it starts, the burden shifts heavily to the CEO.

This varies by individual, but most CEOs who make it this far are good at selling what makes their company special. Your role is to support them, handle the details, and do whatever you can to help them succeed. It is common for people to lose their voice or have their energy dip over the course of a roadshow, so you may need to step in more than expected — but you should not plan on it.

The meetings themselves feel very much like the wall-crossing meetings. Most are cordial, with a back-and-forth Q&A. Styles vary widely among analysts and portfolio managers. Some questioning styles can feel combative or dismissive. Do not take it personally, and warn your CEO in advance if you sense that style emerging.

Some of the largest orders I have seen came from firms that sounded the most negative in the room. Maintain an even keel, but do not become expressionless. Investors expect some passion from management. Unlike routine IR meetings, IPO roadshows tend to involve a higher proportion of portfolio managers — actual decision makers — rather than just analysts.

At the end of each day, the order book will be updated and you will get a snapshot of how many orders are coming in and from whom. The ECM team at the lead bank will be increasingly directive about allocations, assuming demand warrants it, but that becomes more important later in the process.

For now, the rhythm is meeting, limo, meeting, limo, eat something, meeting, limo. It all blurs together. I have a good memory, but if I do not take notes, I struggle the next day to recall who said what.

As the book grows, you will see which banks are delivering orders. It often looks like the lead bank is doing all the work, but that is partly an artifact of book control. Non-lead sales forces may push less aggressively because investors know which ECM team controls allocations, so they route orders accordingly. Analysts across the syndicate are usually working hard, and smaller banks often bring in smaller accounts that larger banks ignore, earning their place in the book.

Eventually, the meetings end and the banks tally the orders. If things went well, they will tell you they have enough demand to put a deal together. I do not work on an ECM desk, but I do know that accounts routinely inflate orders in expectation of being cut back.

If you assume roughly 100% order inflation, the common rule of thumb that a deal should be 3–5x oversubscribed really means you need something closer to 6–10x in raw demand. This varies based on market cap and, more importantly, the quality of the orders, not just the quantity — but as a rough guide, it is about right.

In my final post on the IPO process, I will cover allocation, the pricing committee, and what happens when trading begins — including how the banks can step in if early trading is choppy.

Excel and Powerpointn icons as hockey players doing a faceoff. SEC logo on the puck..

IPO Process – Underwriting, Forecasts, And The Road To Launch

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On February 3, 2026

In Accounting and Reporting, CFO, Investing, Investor Relations, Working With Investment Banks

While you are grinding away on the S‑1, there are many other work streams running in parallel. One of the most important—and least talked about—is getting through the underwriting process. The S‑1 gets you most of the way there, but it is not enough on its own. You also need to provide the banks’ analysts with a detailed financial forecast.

This is very different from life once you are public. Under Regulation FD, you do not share your detailed internal forecast with sell‑side analysts unless, for some very unusual reason, you have already made it public. During the IPO process, however, you are still a private company, and those public‑company disclosure rules do not yet apply.

This forecast matters a lot, and it needs to be carefully balanced. There is always a temptation to push the numbers—stretch the growth assumptions and aim for a higher valuation at the IPO. In my experience, the less public‑company experience a leadership team has, the stronger that temptation tends to be. That is a meaningful mistake, and it can have consequences in several different ways.

The first is credibility with the sell‑side analyst. This is someone you are likely to have a relationship with for years. The more aggressive your forecast, the more questions you will get. Analysts are very experienced at talking to management teams, and they are good at figuring out when numbers lack a solid foundation. Even if you can technically defend the assumptions, they will still wonder why you are pushing so hard. These analysts work closely with potential investors and will be fielding questions about expectations. You want them transmitting confidence, not concern.

The second issue is the pressure you put on yourself to hit your first few quarters as a public company. The IPO process feels like a sprint, but being public and creating long‑term value is much closer to a cross‑country run than a 50‑yard dash. Missing your first quarter right out of the gate can be catastrophic for credibility. It is very hard to reset expectations once you stumble early.

The third consideration is internal to the banks themselves. Your banking team has to take the deal in front of their internal committees to get approval and a green light to proceed. Everyone in that room has seen dozens—if not hundreds—of IPOs. Their job is to control risk. A management team that appears overly promotional or willing to stretch the truth to grab incremental valuation is a risk factor.

This does not mean you should sandbag the numbers. It means you should make sure you do not need perfect execution and a lot of luck to hit the first few quarters. If you need another practical reason to stay disciplined, remember that you are going to be locked up for at least six months after the IPO. There is no immediate personal benefit to being overly aggressive right out of the gate.

This forecasting exercise also feeds directly into the final negotiation around the expected IPO price. It sounds great to see the stock skyrocket the moment trading begins, but that simply means you left money on the table. A healthy first‑day pop sets a positive tone. An excessive one is just capital you failed to raise. You might recapture some of it later through a secondary offering, but it is far better to price the initial deal thoughtfully.

At the same time, you are also building the roadshow presentation. In the successful IPO I was part of, this was heavily driven by our founder and CEO. He had previously gone through an unsuccessful roadshow, but the business had changed dramatically by the time of this one. Building the presentation inevitably involves bouncing back and forth with the business section of the S‑1 to ensure that every claim and message is properly reflected in the prospectus.

I was fortunate that our founder drove this process. He had deep institutional knowledge of the company and a clear sense of what mattered. Roadshow presentations are strange things. Sometimes they are the focal point of investor meetings. Other times they barely get looked at, and the conversation turns immediately into Q&A.

You will also use this presentation to record the virtual roadshow, so it will be seen by a large number of potential investors. I generally recommend including a few “halo” slides that act as launching pads for key investment themes. Not everyone naturally finds their rhythm in an investor meeting, and a well‑structured presentation can help create momentum. Our CEO did not really need it, but for many teams it can be valuable support.

I am always amazed by how much time gets spent on presentations. This one is more important than most, but it is still a massive time sink. There are so many cooks in the kitchen that the final version is often worse than an earlier draft. In addition to the usual internal stakeholders, your lawyers and the banks’ lawyers will give it an extremely thorough scrub. Eventually, it does get done, and you inch closer to launch.

Usually the last major hurdle—assuming the market is open—is final approval from the SEC. I have written previously about responding to SEC comment letters, and the process is not fundamentally different here:

Responding to a comment letter from the SEC

The stakes are higher and the time pressure is intense, but the mechanics are the same. The key difference is that you generally do not have the option of saying, “We will improve this in the next filing,” even for relatively minor disclosure issues. The SEC will want it fixed now.

You need to move quickly as you approach your intended launch window, but it is worth remembering that the SEC does not want to stop you from going public. Their job is to make sure you are following the rules. You may not even receive a detailed review—or any review at all. If you planned properly and staffed the process correctly, this stage should be manageable. If the SEC uncovers multiple accounting or disclosure issues, however, the process will stall, and it will be obvious to everyone why.

Once you clear this final step and your banks confirm that the market window is open, you instruct your lawyers to notify the SEC that the S‑1 is effective. At that point, you actually launch. My next post will cover what happens once the process moves fully into the roadshow and selling phase.

Unstable stack of SEC filing papers. Several pages swirl showing edits.

Doing an IPO: The Reality Behind the Process

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On January 29, 2026

In Accounting and Reporting, CFO, Investor Relations, Working With Investment Banks

There is a lot of information available online about IPOs at a very high level. As with my other posts in this series, my goal here is to connect theory with my actual experience. In this post, I focus on actually doing an IPO—drawing on the transaction I helped lead roughly five years ago, along with more than 20 years of broader equity capital markets experience as a public company CFO.

This post is written for CFOs—and for those who want to become CFOs—because the IPO process is as much a test of the finance function and its leadership as it is a capital markets event.

An IPO doesn’t just test the company. It tests the CFO, the finance team, and every system beneath them.

Choosing the IPO Path: Traditional vs. SPAC

When we set out to pursue an IPO, we focused on a traditional underwritten offering. We did speak with several SPACs, but the valuations were not as compelling—and became even less attractive once we factored in the additional costs and structural complexity inherent in SPAC transactions.

At the time, SPACs promised speed and certainty. In practice, the economics simply did not work for us. That will not be true in every situation, but it is a decision that needs to be made with eyes wide open and a clear understanding of the trade-offs.

Your Core Advisors: Lawyers, Auditors, and IPO Specialists

Traditionally, your two primary advisors are your lawyers and your accounting firm. Your banks also advise you, but during the underwriting process there is an inherently adversarial dynamic: you must clear their internal risk processes before they will support launching the deal.

Today, there is an additional category of advisor that can be extremely helpful—IPO advisory firms that specialize in managing the process end to end. These firms are typically compensated through a share of banking fees and help guide management through what is otherwise a complex and unfamiliar process.

We used an advisory firm (Solebury Capital in our case, though there are others). For smaller companies, and particularly where management lacks deep capital markets experience, these advisors can materially reduce execution risk.

Getting the Right Lawyers and Auditors (and Paying for It)

It is critical that both your lawyers and auditors have meaningful IPO experience. In the case of auditors, they must also be SEC-approved. This is one of the first points in the process where fees increase noticeably—market credibility and IPO experience come at a premium.

You may need to switch firms entirely. Auditors, in particular, must be engaged well in advance. Ideally, they will have completed at least one full annual audit before the IPO process begins and resolved any issues related to reliance on a predecessor firm’s work.

Lawyers are somewhat easier to bring in later for the registration process, even without a long operating history with the company.

Hard CFO Career Advice: This Process Will Expose You

Here is some very direct CFO career advice: the IPO process is a stress test for you, your finance team, and your systems.

Once auditors know their opinions will be included in an S-1 used in an IPO, their risk tolerance drops sharply. They will be demanding—and appropriately so.

If your people, systems, or processes are not ready, that will become apparent very quickly to the entire IPO team. The finance function comes under an intense spotlight. You can lose the confidence of the Board, and the risk of replacement is real.

No one is really your friend during an IPO. The work has to be done before the spotlight turns on.

There is a reason you often see a new CFO brought in six to twelve months ahead of an IPO.

Marketing Readiness and the Company Story

You should already have your core marketing points prepared. Even an early, imperfect version of the company story helps attract banks and investors.

Today, it is rare for a company to go public without having completed multiple rounds of private financing, often with investors who also operate in public markets. Those interactions matter more than many CFOs initially realize.

Choosing the Banking Team

Once you are ready to proceed, this is the stage where you select your banking team. Ideally, you have been investing in banking relationships while still private and have a meaningful starting pool.

If not, an IPO advisory firm can be particularly helpful.

Even if you do have relationships, they may not be with the right analysts or sector teams. While there is significant focus on choosing the lead bank during the bake-off process, you will ultimately work with a syndicate. Use the process to signal that smaller banks matter—even if they are not selected as lead.

The Team Matters More Than the Bank Name

This is an important concept: the bank’s name appears on the cover of the S-1, but it is the banking team that actually works with you.

You want the A-team, not the C-players at a prestigious firm. Internally, this comes down to respect. Bankers want to make money by solving problems efficiently. They do not want unnecessary friction or rework for the same economics. The bank’s internal staff know who their A-players are and what trouble their C-players will cause, so make sure the team representing you is strong.

During the bake-off, do not over-index on brand. Lean on your advisors and your own judgment about the individuals involved. Consider which banks bring the better sell-side analysts. The bank ultimately will step in and do what they can to get the deal done, but everything will be easier with the best team.

Strong teams get cooperation—from the bankers themselves and from the broader institution behind them.

Why Experience Matters (and Why Advisors Help)

Going through this process reinforced the value of our IPO advisory firm. Companies typically do one IPO. Even with internal capital markets experience—in our case, I was the only executive with prior IPO experience—you do not have the transaction repetition your advisors bring.

Auditors are less helpful here due to their role constraints, but they can recommend experienced law firms and partners. If you are VC-backed or PE-owned, your investment partners are also an important resource. Members of the broader management team may bring useful experience from prior financings or acquisitions as well.

The IPO Is a Sales Process

Some companies spend years nurturing banking relationships and presenting their story as a potential IPO candidate. Others gain similar experience through extensive pitching during venture fundraising or private equity acquisition processes.

If you are one of those companies, the next stages will be easier.

At its core, an IPO is a sales process.

The S-1: The Center of Gravity

The S-1 is the central document that drives nearly every aspect of the IPO process. Broadly, it consists of three main sections: the business, the financial statements, and the risk factors. Extensive appendices include material contracts and governance documents, such as share class and voting arrangements.

While significant effort goes into the investor presentation, that document is also filed with the SEC and is, in many ways, an extension of the S-1.

The drafting process is highly iterative—first within management, then across a broader internal group, and finally with the SEC once a near-final draft is filed. Confidential filing allows much of this work to occur outside public view until late in the process.

Risk Factors and Exhibits

Risk factors and appendices are generally the most straightforward sections. They are heavily lawyer-driven, and you benefit from reviewing filings of comparable public companies. SEC filings are not copyrighted, so language can be adapted where appropriate.

Management’s role is to ensure risks are complete, properly ordered, and reflective of the business. This section exists primarily to protect the company—if a risk is disclosed, investors have been warned.

The appendices require careful attention to which contracts will become public. Confidential treatment may be available for certain provisions, but disclosure is part of life as a public company, including detailed executive compensation disclosure. This also tests your document retention systems, as signed final versions are required.

The Business Section and the “Box”

The business section has the greatest marketing impact and the largest working group. It must satisfy SEC scrutiny while still presenting the company in the best possible light.

At the front of this section is the “box”—a concise summary set apart on the page that distills the company’s story. This content feeds nearly all other marketing materials and is reviewed relentlessly. Every claim must be substantiated. If you describe yourself as a “leader,” expect to prove it.

Despite being the least technical section, it often receives the most edits. My strongest recommendation is that the CEO own the final narrative voice. They will be doing most of the talking during the roadshow, and the document should sound like them.

Financial Statements: Where IPOs Get Won or Lost

Across the three S-1s I have prepared, the financial statements section always took the longest, produced the most surprises, and attracted the most SEC comments. Auditor scrutiny increases dramatically, and previously cordial relationships can become strained.

Every accounting policy must be fully documented. Disclosures must meet technical requirements, including MD&A and segment reporting. Poor segment decisions can create both compliance and marketing challenges.

I began my career at a Big 4 firm, became a Chartered Accountant, worked extensively in internal audit and controls, served as Controller of a public company, and had been a public company CFO for 14 years before leading this IPO. Even with that background, success depended entirely on having a strong SEC reporting team.

Experience helps—but systems, people, and preparation determine outcomes.

That team existed because earlier attempts to go public had uncovered material weaknesses across Finance and IT. Much of my first six months was spent rebuilding the close process and reporting to public company standards. If you are considering an IPO within the next year, you should be upgrading staff and systems now.

Preparing for SEC Reporting Standards

You will have help. Accounting firms provide detailed SEC reporting checklists. But your people must be capable of meeting the higher standard.

While SOX compliance is not required before going public, you should be close enough that it would not fail.

You are the CFO. Even without a deep accounting background, responsibility ultimately rests with you. Invest in better people and put in the time.

Filing the S-1 and Engaging the SEC

Once the S-1 is in strong draft form, it must be filed. While ongoing SEC reporting can be handled internally, the S-1 filing itself is typically managed by a financial printer specializing in SEC formatting and XML requirements. Errors here carry real risk.

Lawyers often have strong preferences for specific printers. Negotiate aggressively and evaluate multiple options—you can often secure favorable pricing for the first year of filings.

The process is far more streamlined than it once was. You are not staying overnight at a printer (Palo Alto was the location for me) where typists work on their Wyse terminals typing into Interleaf or whatever special system they used. Drafting happens in Word, with later conversion by the printer. You still need to review formatting and the final text in the printer system carefully, but by this point the financial statements should be in excellent shape.

With the confidential filing complete, the SEC review process begins.

Looking Ahead

In the next post, I will walk through the remaining stages of the IPO process, including SEC comments, the roadshow, pricing, and execution. By this point, however, you will know whether your finance organization is truly ready to be public.

Business man chasing dollars with stock charts around him

IPO – The Other Ways to Get There (and Why They Usually Aren’t the Best Choice)

By

On January 26, 2026

In CFO, Finance, Investor Relations, Working With Investment Banks

In my prior post I made the case that, in most situations, a traditional underwritten IPO is the best path to becoming a public company. That does not mean it is the only path. There are several other ways to end up public in the U.S. markets, and as a CFO you need to understand them well enough to evaluate whether they are genuinely better for your company—or simply more tempting in the moment.

What follows is not a legal or structural deep dive. Law firms do that very well. This is a CFO’s view of the tradeoffs.

Direct Listings

Direct listings get a lot of attention, largely because they avoid underwriting fees and feel more “modern.” In practice, they are only viable for a very narrow set of companies.

A direct listing works best when a company already has strong brand recognition, a large and diversified shareholder base, ample liquidity, and no need to raise primary capital at the time of listing. In other words, the market already knows the company well and wants the stock.

For most companies considering going public, those conditions simply do not exist. Without underwriters driving the process, building demand, and helping establish an orderly market, the risks around price discovery and early trading volatility increase materially. That doesn’t make direct listings bad—it just makes them inappropriate for the vast majority of IPO candidates.

Reverse Mergers and SPACs

Reverse mergers, including de-SPAC transactions, solve one problem extremely well: certainty.

You know you are getting public. You know when. You know the structure. You are not dependent on an IPO window being open three months from now. From a CFO perspective, that certainty can be very appealing, especially after living through aborted IPO attempts.

Another advantage is that you typically do not file a traditional IPO S-1. While disclosures are still extensive, the path is different and often faster.

Those benefits, however, come with meaningful tradeoffs.

The biggest issue I have seen is the absence—or weakness—of the traditional banking ecosystem around the transaction. Without a strong underwriting syndicate, you often lack coordinated sales coverage, aftermarket support, and high-quality analyst research. That can lead to thin trading, poor liquidity, and valuations that fail to reflect the company’s fundamentals.

SPAC structures also tend to carry costs that are easy to underestimate. Dilution from sponsor promotes, warrants, PIPE discounts, and redemptions can be substantial. While underwriting fees may look lower on the surface, the all-in cost of capital is often higher than it first appears.

Reverse mergers are not inherently bad, but they trade IPO execution risk for post-transaction market risk—and that trade is not always obvious at the outset.

ADRs / ADSs

ADRs and ADSs are primarily tools for companies that are already public outside the U.S. They are mechanisms to package foreign shares into a U.S.-compliant instrument.

They are not, in practice, an IPO alternative for a private company deciding whether to go public. For that reason, they are usually a footnote in this discussion rather than a core option.

Spin-Offs

Spin-offs are a different animal entirely and typically apply only when you are already part of a public company.

There are two primary ways to execute them. One is selling shares of the subsidiary into the public market, effectively raising capital. The other is distributing shares to existing shareholders of the parent company.

Each approach has very different implications for capital structure, investor base, tax treatment, and management incentives. From a CFO standpoint, spin-offs are less about “going public” and more about capital allocation, strategic focus, and value realization. They can work extremely well, but only in very specific circumstances.

The CFO Lens

All of these alternatives exist for a reason, and in certain situations they are the right answer. What they generally do not do is eliminate risk—they simply move it around.

The traditional IPO concentrates risk upfront in execution and timing, but it also brings structure, market education, analyst coverage, and tools to manage early trading. Many alternative paths reduce upfront uncertainty while increasing long-term market and valuation risk.

As a CFO, your job is not to chase novelty or certainty alone. It is to understand which risks you are taking, which ones you are transferring, and whether the resulting public company is actually stronger five years down the road.

In the next post, I’ll tie these structural choices back to what actually happens during an IPO process—and what most people outside the room never see.

A grail with $ signs and charts on it

IPO – How to Grab This Holy Grail

By

On January 22, 2026

In CFO, Finance, Investor Relations, Leadership, Working With Investment Banks

In the first year of my most recent job, I finally managed to get an IPO done. I had been close a couple of times in the past, but in each of them the market took a dive right when we were close to launching. One time the 2008/2009 financial crisis hit and the window slammed shut. The next time the leading company in the space suddenly imploded and almost instantly went into a hard bankruptcy. The market as a whole was still open, but there was zero investor appetite for the type of company I was trying to get over the finish line (yield co).

We had done all the work in each case with the S-1 done and the banks lined up, but if the market is not taking deals, no one cares about all the work you did. That is my first caution about doing an IPO, a lot is not under your control.

I want to expand that idea to the career of being a CFO.  There is really no guarantee that an IPO will happen. I have been approached many, many times by recruiters looking for a CFO for a pre-IPO company. Many are said to be 3 to 5 years out. Others within 2. Over the years it has to be 30 to 40 different approaches. 2 companies actually made it public and I worked for both. One after I left and then the window opened again and the one I just left and I succeeded at taking it IPO.

IPOs are pretty rare and never a sure thing. Even the company I succeeded at had tried once before and had the bad luck of immediately following Facebook and that initial attempt failed.. The market reaction to Facebook’s IPO created real hesitation for anything adjacent. As much as it is exciting and potentially pretty lucrative, be thoughtful before accepting a job where a lot of the attraction is the IPO. The further away the expected IPO is, the lower the chance it will happen when it is expected. Usually you are not taking pure start-up risk if the company is seriously considering an IPO, but it is riskier than average, so can you recover from failure? Remember that the consequences of failing typically fall most heavily on the CFO, even if the real issue is not financial.

Why Do an IPO?

Earlier in my career I went to a CFO interview for a pre-IPO opportunity and ran into a founder CEO who did not want to do one and wanted to argue with me about it. Once I got past the annoyance of the disconnect between the recruiter’s pitch and the job the hiring manager had, the discussion basically boiled down to the company was cash positive and had no barriers to growth because of a lack of capital. Ultimately that company stalled a little and got bought out by a larger public company and the CEO / Founder was let go, but at the time, it was doing well and we had a hard to and fro about the pros and cons of being public vs. private.

For me, it only makes sense for a company to go public if the weighting of these five factors clearly points in that direction. This is not a checklist exercise—circumstances vary, and the Board and management team must deliberately weight each factor to determine whether being public truly strengthens the company.:

  1. The company needs access to permanent scalable capital
  2. Shareholders, including early employees, need liquidity that the private market cannot provide
  3. The company requires acquisition currency
  4. The extra credibility, brand augmentation and market positioning is a big positive
  5. It is needed for talent attraction and retention

There are real downsides to being public, including a potential lack of flexibility because you now need to meet external expectations and in a way that there is no hiding from timing and execution. You also need a robust financial reporting system and a strong forecasting ability. Your ongoing audit, legal and insurance expenses will jump in a pretty significant manner.

So if you are part of the management team and looking at it or interviewing to join to be part of the process, you can sum up the choice into one question, “Does being public make the company strategically stronger five years from now – net of cost, distraction, and loss of flexibility?” Or, in my case having lived off and on in Silicon Valley for several decades and not done an IPO “Do you want to take the chance and just do it so you join many others here in the experience?”

Years ago and still embedded into some foreign stock exchanges is the profitability criteria. However, there are so many unprofitable and earlier stage companies that have gone public (common in drug development and many tech companies) that profitability is often just a valuation footnote.

How do You do an IPO?

There are actually quite a few ways you can get public in the USA, and these are some of the main ones:

  1. Traditional Underwritten IPO – One (usually many more) investment banks take a risk position and then bring the company public.
  2. Direct listing – The company lists their shares directly on an exchange.
  3. Reverse Merger (may be a de-SPAC) – Merge with an already public company in a way that results in you controlling it. Has become much more of a tailored transaction using SPACs.
  4. ADR/ADS – Package up foreign shares in a compliant instrument and list on a USA exchange.
  5. Stumble into it – have enough shareholders that you qualify under SEC rules. Could be Reg A+ or Reg D.
  6. Spin-offs from already public company.

I don’t want to try and make a comprehensive document of all the different ways to do it. There are much better sources via law firms that explain the legal mechanics in detail. Instead I will concentrate and discuss the ones I know the most because of personal experience, and the one I was successful at was a traditional IPO.

To start with, I will make a sweeping statement: in almost all situations, a traditional IPO is best.

Being underwritten by banks and going through the full SEC registration process forces a level of rigor that most private companies simply have not needed before. Drafting and refining the S-1 is not just a disclosure exercise; it is an operational stress test. Financial reporting, controls, forecasting discipline, risk articulation, and internal processes all get examined, challenged, and tightened. Companies that survive this process emerge far better prepared to operate in the public markets than those that try to shortcut it.

Equally important is the role of the banking syndicate itself. The lead and co-managing banks bring together investment banking, equity capital markets (ECM), research, sales, and trading into a coordinated effort. The ECM team, in particular, has deep, current knowledge of the IPO investor universe—who is allocating capital, what themes are working, what valuations are realistic, and how demand is actually forming across different types of funds. This is not theoretical insight; it is informed daily by live deal flow and constant feedback from institutional investors.

That knowledge is critical in shaping the equity story and preparing management for the roadshow. The banking team helps refine the narrative, pressure-tests messaging, and ensures that management can clearly and consistently articulate strategy, growth drivers, risks, and capital allocation priorities. The roadshow itself is not just a marketing exercise; it is a real-time discovery process. Investor reactions feed back into pricing, sizing, and allocation decisions, all with the goal of creating a stable, high-quality shareholder base from day one.

One additional advantage that should not be overlooked is ongoing analyst coverage. As part of a traditional IPO, the underwriting banks initiate research coverage after the quiet period, providing the market with a structured, independent framework for understanding the company’s strategy, financial model, and long-term prospects. This coverage helps educate a broader investor base, supports liquidity over time, and creates an ongoing dialogue between the company and the market—something that is difficult to replicate without a full underwriting syndicate.

Finally, a traditional IPO provides a tool that alternatives simply do not: stabilization. In volatile markets—or when sentiment shifts unexpectedly—the underwriters have the ability to support trading in the early days after the offering. This is not about propping up a weak company; it is about managing technical pressure and ensuring an orderly market while the investor base settles. That option alone can materially reduce downside risk in the most critical period of a company’s life as a public entity.

Taken together, underwriting discipline, rigorous preparation, informed investor access, ongoing analyst coverage and the availability of stabilization create a framework that maximizes the odds of a successful transition to the public markets. In most cases, that structure is not a burden—it is a competitive advantage. You need to pay for it via underwriting fees, but I think you get more than what you pay for.

I will explain my views on the other methods of going public in my next post and then have one more post to weave in my experience to what typically happens in an IPO.

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