Understanding the Initial Public Offering (IPO) Process in the USA

Launching an initial public offering (IPO) is a major milestone in a company's life cycle. Going public typically refers to when a company undertakes its initial public offering, or IPO, by selling shares of stock to the public, usually to raise additional capital.

Despite the current IPO market, private companies continue to evaluate methods for going public. After a record-breaking year for initial public offerings (IPOs) and special-purpose acquisition companies (SPACs) in 2021, the market has remained slow for several years amid various challenges, including volatile markets, global trade uncertainties, geopolitical conflicts, interest rate increases, inflation, and supply chain issues.

While an IPO tends to attract media attention, we often don't hear as much about the initial public offering procedure. What is needed when filing for IPO process? How long does it take, and how can companies stay organized throughout?

Keep reading to learn all about the IPO roadmap, how much time each step takes, and what to keep in mind. If you decide to conduct a registered public offering, the Securities Act requires your company to file a registration statement with the SEC before it may offer its securities for sale.

Once your company's registration statement is “effective,” the company becomes subject to Exchange Act reporting requirements. Once the formerly private-held company has undergone an initial public offering (IPO), it is now recognized as a public company.

An initial public offering (IPO) is the process of a company selling its shares to the public for the first time. IPOs are typically used by young companies to raise capital for future business expansion. These shares are initially issued in the primary market at an offering price determined by the lead underwriter (this is who organizes the syndicate of banks and brokers). The primary market consists of investment banks and broker dealers that the lead underwriter assembles. These banks and broker dealers allocate shares to institutional and individual investors.

Reasons for Going Public

Going public is a significant step for any company and you should consider the reasons companies decide to go public. A company may want to go public for several reasons, such as raising capital, creating new opportunities, or to provide an exit strategy for early investors.

While a company may have a compelling reason to go public, an IPO needs to consider other aspects of readiness, such as:

• Market conditions: Does the market support an IPO right now?
• Corporate governance: Are there outstanding governance issues to address?
• Financials: Do the numbers tell a good story?

This IPO readiness checklist may be a helpful communications tool throughout the process. It outlines key personnel involved in the deal, due diligence before an IPO, and the IPO roadshow. Combined with this timeline, it can help set expectations and streamline communications.

The IPO Process Timeline

IPOs have a lot of moving parts. This IPO process timeline will help you understand what needs to happen, why and - most importantly - why.

IPO Roadmap

Preparation Phase: 12-18 months

During the IPO, your company's operations, financial health and governance will be getting scrutiny from SEC officials, the media and the public. During this stage, comb through the business finances and corporate governance, asking "Is this ready for public scrutiny?" Then identify any areas that need extra attention

• Prepare work plan for IPO readiness
• Assess financial statements and evaluate audit firm
• Assess internal resources & assemble team (accounting, FP&A, legal, IR)
• Evaluate need for third-party advisers
• Consider structural decisions (e.g., corporate, tax, compensation)

Organizational Meetings/Pre-Filing: 4 - 6 months

• Kickoff meeting with all key players establishing internal timeline
• Engage lead underwriters who play a key role in the IPO process by evaluating business finances and helping set the share price.
• Prepare S-1 Equity story/investment thesis Historical financial statements & MD&A Risk factors/legal sections Financial model

Initial Submission and Roadshow Preparation: 3 months

• Confidential submission of S-1/F-1 under Form DRS and SEC review process including filing multiple amendments due to SEC comments, which are delivered over the course of multiple rounds lasting typically 12 to 14 weeks altogether
• Teach-in with syndicate analysis
• Prepare roadshow presentation including slide-deck
• Publicly file S-1/F-1 at least 15 days prior to launch of roadshow
• Finalize IPO documentation
• Organizational and governance documents
• Listing application
• Underwriting agreement

Roadshow: 2 weeks

• Finalize preliminary prospectus with indicative price range.
• Launch roadshow for your IPO (typically 7-10 trading days) /meet potential investors.

In a roadshow, the company promotes the IPO to potential investors. Investors have an early buy-in opportunity during the roadshow. This means they can buy shares for a better price than the public, once the information becomes public. Demonstrating a track record of success and assembling a team with proven credentials helps inspire confidence in investors. The feedback you receive during this phase can help you adjust your final pricing and terms.

Pricing/Trading: 1 day

• Price IPO after market close at conclusion of roadshow. Several factors influence the final price, including projected investor interest, roadshow performance and real-time market conditions.
• Begin trading next day after pricing. When the market opens, shares are officially on offer. Investors buy, the stock begins to trade, and the company has officially gone public.

Close third trading day after pricing

Life Post IPO

• Quiet Period: After the IPO is finished, companies usually have a quiet period. During this time, companies downplay promotional activities, in adherence with SEC regulations. The share price may rise and fall, in accordance with investor demand. There is some wrap-up paperwork that must be completed and filed with the SEC.
• Regulatory Compliance and Reporting
  • Extensive quarterly reporting
  • SOX compliance
  • Annual reports and recent event
  • Proxy Statement, Annual Meeting
• Maintaining Investor Relations: Investor relations is a critical element of the post-IPO process. This is how you keep all your investors informed and engaged.

Knowing more about the steps of an IPO will help everyone stay on track as the company moves toward an IPO. If everyone on the team does their part within the right time frame, the launch should be a success.

While checklists and guides will help a company stay organized during the IPO, don't overlook the importance of a secure, encrypted financial reporting tool for filing with the SEC.

Key Steps in the IPO Process

Traditionally, the IPO process is initiated by a private company hiring several investment banks-often referred to as “underwriters”-to advise on the transaction and ensure the maximum amount of capital is raised, with the minimal amount of issues encountered. Together, the underwriters of the IPO must structure the offering and settle on the terms. In particular, the offering price must be set appropriately, where the maximum amount of capital is raised.

Step 1. Hire Underwriters

Step 2. Red Herring Prospectus + Roadshows

Once the company prepares to “go public”, the investment banking advisors will market the company to institutional investors via “roadshows” to first secure demand from those investors with substantial sums of capital. The roadshow comprises a series of presentations given by senior management alongside their team of advisors to potential institutional investors to gauge their initial interest and figure out how to convince them to participate, i.e. “book building”.

Before the roadshow, the advisors also prepare a preliminary prospectus, also known as the “red herring prospectus”, which contains information on the company.

Step 3. Submit S-1 Filing

The pricing of the offering is arguably the most important decision because the offering price is perhaps the most influential determinant of investor demand. The terms surrounding the IPO, such as the offering price and listing date are largely predicated on the interest level of institutional investors, as their participation is crucial to the underwriting process.

Step 4. Obtain Formal SEC Approval

The formal approval and sign-off on the S-1 filing from the SEC is mandatory before the company’s shares can be distributed into the open markets.

Step 5. IPO Share Issuance

Once shares are officially issued, the company’s IPO is technically complete, and it is now recognized as a publicly traded company. But the underwriters must continue with their efforts to ensure all the stock issuances are sold and to stabilize the price, if necessary.

The S-1 Filing Requirement

Before a company commences a public offering of securities, it must file a registration statement with the SEC under the applicable securities laws. The form used to file the registration statement will depend on the nature of the offering.

The first part of the S-1 contains the legally required information detailing the sale of the securities. The information covered tends to be an overview of the company’s history, its long-term vision.

The company’s operating segments must be identified and described in detail. The methodology used to arrive at the stated offering price is explained in-depth here.

Since dilution is a significant risk to investors, the current capitalization (i.e. A biography section with details on the background and qualifications of each director and executive officer.

SEC Review Process

Companies undertaking a traditional IPO can voluntarily submit a draft registration statement to the SEC staff for confidential, nonpublic review. The ability to submit confidentially is a significant benefit because it allows companies to keep potentially sensitive information from customers or competitors until later in the IPO process.

Once submitted to or filed with the SEC, a registration statement is reviewed by the staff of the SEC’s Division of Corporation Finance (the “Division”), which will generally complete its initial review and furnish its first set of comments within 27 calendar days. The company then responds to each of the staff’s comments and reflects edits to the draft registration statement in an amended filing, which the staff will also review.

A company can expect several rounds of comment letters containing follow-up questions on responses to original comments as well as additional comments on new information included in the amended registration statement. After the initial review, subsequent comments are typically furnished within two weeks.

In April 2025, the Division released a statement related to the application of certain disclosure requirements under the federal securities laws to offerings and registrations of securities in the crypto asset markets.

Financial Statement Requirements

Financial Statements for IPO Requirements

A company must determine what financial statements are required in the registration statement. While this determination may appear straightforward, additional complexities may arise because a company may first need to determine the legal entity that will become the SEC registrant.

The financial statement periods to be included in the IPO registration statement depend on the company’s characteristics and the timing of the document’s submission. Smaller reporting companies (SRCs) and emerging growth companies (EGCs) generally have the option of presenting only two years of audited annual financial statements in a traditional IPO, while all other entities must present three years.

Further, under SEC regulations, the financial statements in an IPO must meet certain age requirements as of each registration-statement filing date as well as when the registration is declared effective; otherwise, the financial statements will be considered “stale.” In general, the financial statements in an IPO filing must not be more than 134 days old (i.e., the gap between the date of filing or effectiveness and the date of the latest balance sheet cannot be more than 134 days). However, third-quarter financial statements are considered timely through the 45th day after the most recent fiscal year-end, after which the audited financial statements for the most recent fiscal year are required.

Certain provisions of US GAAP for public entities differ from those for nonpublic entities. Notably, public business entities (PBEs) are generally required to adopt new accounting standards before private companies. In addition, a company undertaking an IPO must present financial statements that are consistent with public-entity accounting principles and must comply with the disclosure requirements for public entities for all periods presented. Further, public entities are subject to various SEC rules and regulations that may affect the financial statements and related disclosures (e.g., the additional disclosure requirements of Regulation S-X). Some of these requirements are broadly applicable, and some apply only to entities in certain industries.

Therefore, a nonpublic entity’s previously issued financial statements will typically need to be revised for all periods presented to reflect the additional SEC disclosure requirements. However, an entity that meets the SRC criteria may be eligible to apply scaled disclosure requirements.

Post-IPO Requirements

After a registration statement is declared effective, a company is required to file quarterly reports on Form 10-Q and annual reports on Form 10-K. As a public company, a registrant must also file a current report on Form 8-K that discloses various material events that occur between its periodic reports. Registrants will also need to comply with many recent SEC rules, including those on executive compensation, clawback requirements, pay-versus-performance disclosures, cybersecurity disclosures, and climate disclosures.

Companies also must continue to comply, on a quarterly basis, with reporting requirements related to material changes to ICFR and DCPs.

SPAC Transactions

After increasing significantly in recent years, SPAC transactions have slowed down as well. 1 In a March 2025 statement, the SEC expanded “the availability of the nonpublic review process for a de-SPAC transaction in situations where the SPAC is the surviving entity (i.e., SPAC-on-top structure) as long as the target is eligible to submit a draft registration statement.” Before this accommodation, only entities undergoing traditional IPOs (as defined above) had the ability to use the nonpublic review process.

Benefits of an IPO

Undergoing an IPO (i.e. Liquidity Event → From the perspective of management and existing pre-IPO investors, the IPO can be a liquidity event. While the IPO is an opportunity for management to “take some chips off the table”, venture firms and growth equity investors often must liquidate all of their positions, irrespective of their long-term thesis on the company’s prospects.

The pre-IPO company, in all likelihood, is backed by venture investors and growth equity investors, so the IPO is an liquidity event, albeit there are restrictions on the timing of when those shares can be sold (i.e. the lock-up period). Venture capital firms and growth equity firms, at the end of the day, are investing on behalf of their limited partners (LPs), so the positions must be exited after the lock-up period and the sale proceeds are then distributed back to the LPs.

As a side benefit, the company’s branding tends to benefit substantially post-IPO, especially from investors interested in potentially owning shares, which indirectly expands the company’s name recognition and makes it easier to attract (and retain) more qualified employees. By becoming a publicly-traded company, a company can potentially benefit from having access to cheaper forms of capital.

Risks of an IPO

The primary risk to management is the company-by virtue of becoming a public company-is no longer under their complete ownership and control. The disclosure requirements as part of going public is meant to provide full transparency of the internal workings of the company, which opens management up to public scrutiny by investors. In addition, the company’s closest competitors can access their filings such as their financials and plans to achieve future growth.

The quarterly filings (10-Q) place more pressure on the management team to meet short-term earnings targets (i.e. earnings per share) and other performance metrics tied to revenue or EBITDA, for instance. Hence, management’s decisions can become short-term oriented due to the external pressure from shareholders and the market to meet their quarterly or annual earnings guidance and targets set by external parties.

The process of going public can be a lengthy process, where the company incurs significant costs, such as advisory fees paid to the investment banks, legal fees paid to lawyers, and other fees paid to third parties like auditors and consultants. The disruption to the company’s day-to-day operations is yet another factor that must be taken into account. The IPO process can meet unexpected, time-consuming hurdles that can extend the time from announcement to becoming a public company.

In that stretch of time, employees can easily become distracted by the media coverage, while management is likely occupied with the entire ordeal of the IPO requirements. The reporting requirements associated with becoming a public company mean more time, effort, and capital must be spent on ensuring compliance with the strict rules established by the SEC.

IPO vs. Direct Listing

In recent years, more companies have opted to go public through a direct listing, as opposed to via an IPO. There are significant risks attached to the decision to go public via a direct listing, where the upside and downside are both magnified. For instance, Spotify (NYSE: SPOT) decided to proceed with the direct listing route at a time when the company was already the market leader in the music streaming vertical.

The shares of newly public companies often surge on the first day of trading, with the market capitalization. However, one must consider that the underwriter must make sure all shares are sold, rather than solely maximizing the valuation. With that in mind, the underpricing of an IPO can be attributed to the investment bank’s primary goal of selling all the shares offered in the issuance.

The post-IPO spike in the share price of a newly listed company represents profits to the investors. Therefore, many critics support direct listing instead of the traditional IPO.

Key Differences Between IPO and Direct Listing

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