How to Prepare for an IPO: Steps for Employees of Companies Going Public

Join our fabulous team of equity comp experts as we unpack the technical and emotional aspects of equity compensation during the initial public offering (IPO) process. 

This is a must-watch video if your company is going public! If you’d rather read, keep going!

 
 

So…your company is going public…now what?! There are so many things to think about when preparing for this life-changing event. While exciting, the actual process can be gut-wrenching, arduous, and will most certainly put you into contact with hundreds of pages of documents. The team at Brooklyn FI has been in the trenches with clients through successful (and unsuccessful) IPOs, DPOs, and SPACs and we’ve got tips and tricks to share with you.

Quick Overview of IPO Expectations

If your company is going public, prepare yourself for: 

  • Conflicting information from various sources

  • Last-minute changes and unexpected restrictions on trading and exercising

  • Phone calls (they don't use email) to a transfer agent or brokerage firm

  • Opening accounts at a brokerage firm you don’t necessarily want

  • Frustration at technology 

  • Frustration at antiquated systems 

  • Frustration at bad data 

How to prepare: 

  • Get your statements and documents ahead of time

  • Have a very clear and simple strategy for the first trading window 

  • Mentally prepare to pay 50% in taxes, anything less will be a nice surprise 

  • Have cash accessible for short exercise windows and tax bills 

Lessons Learned from Many Public Offerings

  1. You may not know your restrictions on trading or even when you can trade until just days before the IPO. 

  2. The stock price on the first day of trading may not start moving until lunchtime on the east coast. 

  3. Past performance doesn’t indicate future results, but…

  4. The first day of trading can be the best price in the short-term (people read Reddit, get excited), but not necessarily the long-term. 

Things to Consider before the Liquidity Event

  1. What shares am I allowed to trade? Are there any restrictions, lock-ups, restrictions?

  2. What is my trading plan - am I exercising? Selling? 

  3. What are the logistics? Do I need to wire cash somewhere? Where do my proceeds go?

  4. If you spent any time working abroad be prepared for aggressive withholding in the specific country and a potential tax credit LATER

  5. What should I do with this lump of cash? What’s this gonna do to my taxes?

Want to know more about equity compensation? Check out our other blog posts on a little thing we like to call the “Techxit.”

AJ Grossan