Video Transcript:

"Hello everyone! Welcome to another and continuing series of webinars brought to you by Proformative. Our topic is the IPO process and it's from the perspective of a chief financial officer. My name is Al Cochran and I have led offerings in four separate public companies thus far in my career. Aside from an overview of the IPO process, we hope to accomplish these objectives today. Now the company recognized the IPO is not a destination but it's the beginning of a new journey, and determine rather or not this new journey is actually right for the organization. Does it fit in with our long-term strategic plans? And if the answer to those questions is yes, realize that this is your process and you can and should control it. The deck that we are going to be using today contains a lot of detail. I don't think that we'll be able to get through all of the items in the deck, but it is to be made available to you for your use as a reference as you undertake your own IPO journey.

Let's dive in shall we? I have written an outline here that has us begin with consideration of rather the IPO does align with the companies overall strategic plan, and try to answer the question what is our objective. And we'll get into some pre-planning. Who are the members of the team to conduct an IPO? What does it take to be successful? What does a typical schedule look like? How does the company prepare itself? Are there any cautions that we need to be aware of in making communications during this process. And then we'll get into the process itself. Everything from the kick-off meeting to the roadshow. And we'll be using some terms in our analysis that may not be a part of your everyday vocabulary, but hopefully by the end of the presentation you'll be more confident with these terms.

So, when we turn our attention to what is our objective? When a company thinks about going public often at the top of the list is liquidity. Rather that is to allow an existing shareholders to monetize some of their investment, rather it's to raise some additional capital, or rather it's to pay down some debt and de-lever the balance sheet, liquidity is at the top of the list. But there are other ways to accomplish the liquidity without suffering a dilution, selling the 25 to 35 percent of the company that's typical. When the company goes public and becoming then a registration and being apart of that forever reporting regime and regulatory regime that goes along with being a public company. It's also quite common for filing a registration's statement to essentially be a for sale sign that's posted on the company and in fact if that's what the company would have in mind, the industrial bankers will talk about a dual process. Where you file a registration's statement but then you reach out to some potential acquirers to indicate what your desires might be. As I say it is not uncommon at all for a company registrations statement, but be acquired in the process, and the registration's statement never become affected. Surely, you recognize that being a public company raises the profile of any organization. So there's a marketing and public relations advantage to being a public company, but it does set in motion a permanent communications protocol with marketing with the FCC that some might think would outweigh the benefits the marketing and PR aspects that we get as a part of being a public company. If an organization has a significant part of its strategy including mergers and acquisition. Then having stock available to do these acquisition or having a currency, if you will, is certainly something to think about in being a public company. Also, the share based compensation programs have more value or more perceived value in the hands of the employees if they can look in a Wall Street Journal everyday and see what the potential value of their options would be if they were able to exercise and so on that day. So, that currency aspect is important.

But once we've determined that these are the right objectives, and it does meet our long-term strategic plan, the company needs to consider the cost. I mentioned there is the dilution that's typical for an IPO to involve a sell of 25 to 30 percent of the company to the public. Rather that's primary shares or in some instances a portion of that might be from existing share holders which is termed secondary shares, but the dilutive effect of doing an IPO is something that the existing share holders need to be able to come to grips with. There is a significant cost both in money and in time, and the process of undertaking an IPO can be a significant distraction to senior leadership. Rather than being involved in the things that generate revenue and run the company, you're often tied up with changing happy to glad and registration's statement. So it can be a significant distraction and you need to come to grips with that as well. There's the ongoing cost of being a public company which can be significant. There are professional fees for attorneys, for accountants, there is DNO insurance, there is the cost of the investor relations program, and it's not uncommon at all for a company to stay with a company with 150 million in revenue to have those cost be on the order of even one percent of revenue.

Another thing I would caution you to think about is the success factors of both in getting an IPO completed and then being a successful publicly traded company. And I think about it in these terms, first of all, does the industry have enough run-way? Is there substantial market opportunities for the company and it's competitors to all succeed? Are the companies' technologies, services, products, all the offerings of the nature that can be sufficiently differentiated in the market place to attract investors initially and to keep the company well positioned against its competitors in the long-term. The other thing I think about is culture. In a new public company it's often the case that the management, rather it's middle management or senior management, we kind of get focused on what the share price is rather than are we doing everything that we should to serve our customers? It's very tempting to do so, but it's important that the company maintain the focus on what got them public to start with, and that's taking care of the business and taking care of the customers. You do have a new constituent of stake holders that you need to pay attention, but not at the expense of serving customers and driving what made the business successful.

Finally I want to talk a bit about the institution's sponsorship. Obviously the interest of the capital market's people from the investment bank is important in getting you to the public arena, and then that kind of shifts once you're public and to the research side and being able to cultivate relationships with those research analysts is important. You'll be able to recognize the level of interests in these financial institutions. As a private company, your phone will ring and people will want to come to talk to you about the business, where you are in the market, they'll bring their obligatory deal book, they'll talk about where you might be in relation to other companies. And then you may even be invited to the investor's conferences and to speak on the private company tracks. So, that kind of attention is significant and important and represents the part of what you got to add in order to put together a strong deal to complete an IPO, but as I say it morphs a bit once you become public and you're then cultivating relationships with the analysts because you want that continued support that can put you in front of new, potential investors after you are a public company."