ipo ready – game planning for a public offering
TRANSCRIPT
IPO Ready – Game Planning for a Public OfferingDecember 4,2014D&O Conference
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© 2014 Protiviti Inc. An Equal Opportunity Employer.
Today’s Discussion
IPO Market Trends
CFO Perspective
IPO Readiness – What Should You Consider?
Call to Action
Legal Considerations
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IPO MARKET TRENDS
$4.2 $5.5$4.8
$25.0
$13.4
$14.4
$3.8$7.3
$6.1
$22.4
$6.8 $8.3 $7.9$13.3 $11.9
$24.0
$11.5
$21.7
$38.0
$13.9
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2010 - Q1 2010 - Q2 2010 - Q3 2010 - Q4 2011 - Q1 2011 - Q2 2011 - Q3 2011 - Q4 2012 - Q1 2012 - Q2 2012 - Q3 2012 - Q4 2013 - Q1 2013 - Q2 2013 - Q3 2013 - Q4 2014 - Q1 2014 - Q2 2014 - Q3 2014 - Q4YTD
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IPO MARKET TRENDS
174153 151
246
305
2010 2011 2012 2013 2014*
Total IPO Pricings: 2010 - 2014
Total IPO Offer Amounts
Source: Factset, Edgar Online, IPOScoop.com
*2014 – 270 IPOs is an estimate based on current rate of pricings
2014YTD – 293 IPOs
Estimate 305 IPOs for 2014
The IPO market has gotten continually stronger year-over-year since 2010. If the current pace continues we can expect over 300 IPOs in 2014.
Quarterly Proceeds
Annual Proceeds
IPO Market Trends: 2010 – 2014 YTD
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IPO MARKET TRENDS
Strong Market Performance Suggests a Healthy IPO Market
Source: Factset.
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S&P500
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IPO MARKET TRENDS
Market Volatility is at Levels Seen in 2006
Source: Factset.
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IPO MARKET TRENDS
IPO filing activity suggests a robust market
Source: Renaissance Capital.
314
256 263
300
104118
253 257
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256
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Historical New IPO Filings
JOBS Act
Passed
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IPO MARKET TRENDS
Source: Factset.
13%
2%
19%
16%
9%
4%6%
17%
11%
3%
22%
36%
-1%
4%
-1%
7%
Health Care Financials Info Tech Consumer Energy Industrials Materials Utilities
First Day Return
YTD Returns
2014 IPO Summary (Q1-Q4 YTD) – Positive Returns Across All Sectors
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IPO MARKET TRENDS
Source: Factset.
20%
17%
18%
15%
20%
7%3%1%
2013 IPO Proceeds
Financials
Health Care
Info Tech
Consumer
Energy
Industrials
Materials
Telecom
23%
11%
38%
6%
16%
4% 2%
2014 YTD IPO Proceeds
2014 IPO Summary (Q1-Q4 YTD) – No Single Dominant Sector
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IPO PERFORMANCE
New stocks have risen an average of 19 percent over the first three months of trading, compared with 36 percent in 2013, and 23 percent in 2012. The top 10
performing IPOs of 2014 so far nearly all have at least doubled their IPO price since listing.
17%
36%
23%
2014 YTD 2013 2012
3 MONTH NEW STOCK PERFORMANCE
IPO Performance Statistics
Source: Dealogic in New York
Top performing IPOs according to IPOScoop & FactSet as of 12/2
Company Symbol Offer dateReturn from IPO
price
GoPro GPRO 6/26/2014 207.88%
Radius Health RDUS 6/6/2014 202.25%
Atara Biotherapeutics ATRA 10/16/2014 189.09%
Zendesk ZEN 5/15/2014 159.22%
CyberArk Software CYBR 9/24/2014 154.69%
Kite Pharma KITE 6/20/2014 150.12%
Immune Design IMDZ 7/24/2014 141.67%
ZS Pharma ZSPH 6/18/2014 140.11%
Avalanche Biotechnologies AAVL 7/31/2014 134.41%
Vitae Pharmaceuticals VTAE 9/24/2014 130.63%
TOP 10 PERFORMING IPOs - 2014 YTD
Our approach is our promise—
and your advantage.
• JOE BRANTUK• VICE PRESIDENT // NASDAQ
• +1 415 243 2378 // [email protected]
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© 2014 Protiviti Inc. An Equal Opportunity Employer.
Legal Considerations
• In April 2012, the Jumpstart Our Business Startups (JOBS) Act became law
• JOBS Act changed the IPO playbook
• Created a new type of issuer – Emerging Growth Company (EGC)
• 85% of IPO issuers since April 2012 were identified as EGCs
• Purposes of JOBS Act
• Easier to go public
• Significant cost savings for IPO process
• On-ramp period provides newly public companies transitional relief from more costly requirements
Background
Testing the waters
Confidential SEC review
Scaled financial disclosure
Reduced executive compensation disclosure
Delayed internal controls audit
Extended phase-in for new GAAP
Primary EGC Accommodations
• Testing the Waters: EGCs can engage in oral or written communications with potential investors that are QIBs or IAIs
• Communications, including offers, permitted before or afterinitial filing of registration statement
• Be prepared to share any testing the waters materials with the SEC
• Confidential Submission: EGCs may submit confidential draft registration statements to SEC
• Does not require board signatures or auditor consent
• No filing fee paid until public filing
• Must publicly file initial submission plus all amendments at least 21 days before conducting traditional road show
EGC Accommodations
• Scaled Financial Disclosure: EGCs may go public
using two years, rather than three years, of audited
financial statements
• Approximately 65% of EGCs have taken advantage of this
accommodation
• Reduced executive compensation disclosure:
• Exempt from full-length CD&A disclosure
• Exempt from Dodd-Frank comp requirements
• Say-on-pay, say-on-frequency and say-on-golden-parachutes
• Pay-for-performance graph and CEO pay ratio disclosure
EGC Accommodations
• Delayed Internal Controls Audit: EGCs are exempt
from the internal controls audit required by Section
404(b) of the Sarbanes-Oxley Act of 2002
• Nearly all EGCs indicated an intention to rely on this phase in
• Extended Phase In: Follow private company phase-
in for new GAAP
• Approximately 77% of EGCs irrevocably opted out of this
communication
EGC Accommodations
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© 2014 Protiviti Inc. An Equal Opportunity Employer.
CFO Perspective
Copyright © 2013 HealthEquity, Inc. All rights reserved. HealthEquity and the HealthEquity logo are registered trademarks and service marks of HealthEquity, Inc.
Confidential and proprietary. Reproduction without express written consent is prohibited.
Darcy Mott
HealthEquity, Inc.
EVP & CFO
HQY IPO Timeline
HQY initial public offering (IPO) timeline
IPO Preparation
11.01.12 – PwC appointed as the Company’s auditors.
01.22.14 – PwC IPO readiness study issued
01.30.14 – JP Morgan & Wells Fargo were selected as lead bankers for
the IPO; Willkie Farr Gallagher was appointed as the Company’s external
corporate counsel.
02.04.14 – Hired Westwicke as the Company’s investor relations (IR) firm.
02.14.14 – HQY’s IPO organizational meeting.
04.05.12 – The Jumpstart Our Business Startups Act or JOBS Act was
signed into law by President Obama.
HQY initial public offering (IPO) timeline
04.02.14 – Filed Form S-1 (confidential filing).
05.09.14 – Filed Form S-1 Amendment 1
(confidential filing).
06.06.14 – Analyst Day: JP Morgan, Wells
Fargo, Raymond James, Baird, SunTrust.
06.10.14 – Filed Form S-1 publicly with the SEC
which included the FY15 Q1 financials.
IPO Process
07.16.14 – The Board passed numerous
resolutions authorizing the Company to
proceed with the IPO.
07.17.14 – Filed S-1 Amendment 2 with
price range on cover ($10-$12/share);
print preliminary prospectus (Red
Herring).
07.18.14 – IPO launched (teach-ins &
roadshow).
Baltimore, New Jersey, New York, Boston,
New York, Chicago, San Francisco, Los
Angeles, Denver, Portland, Seattle.
07.30.14 – Concluded roadshow; pricing
$14/share; HQY effective with the SEC;
finalized share allocation; issued pricing
press release; Final preparations to
starting trading on 07.31.
07.31.14 – Issued 10.465M shares;
raising $132.4M net, including the over
allotment shares; Ringing the NASDAQ
opening bell celebration, Open trading at
$20/share.
08.01.14 – Filed the final prospectus with
the SEC.
HQY initial public offering (IPO) timeline
Post-IPO activities
09.12.14 – HQY files FY15 Q2, Form 10-Q with the SEC.
09.09.14 – HQY FY15 second quarter earnings release and call.
08.25.14 – HQY Post-IPO quiet period expires. Research analysts
Release first set of research reports on HQY.
09.04.14 – HQY conducted its first Board of Directors Meeting,
as a publicly traded company.
09.03.14 – HQY conducted its first Audit and Compensation Committee
Meetings of the Board of Directors, as a publicly traded company.
LET’S GO
PUBLIC!
maybe…
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Which image comes to your mind
when you hear the word “IPO”?
Let’s Go Public!maybe…
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Here are a few of my personal
favorites…
Let’s Go Public!maybe…
Table of Contents
Copyright © 2014 Vivint Solar All Rights Reserved
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Cash
Liquidity – stockholders /
employees
Acquisition currency
Access to public markets for
future financings
Enhancement of company’s
stature
Perceived stability and
competitive position
Enhancement of market value
IPO 101 Is it really worth it?
Benefits:
Distraction
Restrictions on publicity and
other marketing activities
Compliance obligations – SEC
reporting, Reg. FD, Frank-
Dodd, SOX, NYSE/Nasdaq,
etc.
Reduced flexibility
Liability
Loss of control
Vulnerability to takeover
Burdens:
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Running a public company is NOT for the faint of heart
Does your company have the “right stuff”?
Disciplined and experienced management team?
Strong internal financial and accounting team and internal controls?
Large TAM, sustainable growth rate and reasonable visibility as to future
financial results?
Sustainable and scalable business model and defensible competitive
position?
Is an IPO really the best route to achieving the company’s objectives?
Why do you want to go public?
Be thoughtful and deliberate
IPO 101 Are you Ready?
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Running a public company is NOT for the faint of heart
Does your company meet the criteria of underwriters and the market?
Would your company’s offering benefit from the achievement of
additional milestones?
Can company management participate in the offering process without
jeopardizing the company’s business operations?
Is your company prepared to operate under strict publicity guidelines?
Is your company prepared to make the level of disclosure required in
connection with the IPO and on an on-going basis?
Is your company prepared to meet the ongoing obligations of being a
public company?
IPO 101 Are you Ready?
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Running a public company is NOT for the faint of heart
Are your insiders willing to relinquish control and answer to the
company’s new public stockholders (and the shareholder advisory
groups – e.g., ISS and Glass Lewis)
Can your company meet stock exchange listing requirements?
Is an IPO really the best route to achieving the company’s objectives?
Is your company prepared to make the level of disclosure required in
connection with the IPO and on an on-going basis?
Is your company prepared to meet the ongoing obligations of being a
public company?
IPO 101 Are you Ready?
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Build for success
Hire good, honest people who possess the right skillsets and have the right
experience – THIS IS CRITICAL, SO DON’T SETTLE!
The Chief Financial Officer and his accounting and finance team more
important than you might think
The Chief Legal Officer is more important than you might want to
acknowledge
Build a “real” board of directors and set expectations
Build a good relationship with experienced legal counsel and independent
auditors
Build a good relationship with investment banks and financial analysts
TripleLindy’s IPO Tips
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Perform regular independent 409A valuations
Stock option exercise pricing is a hot button for the SEC (and the IRS)
Involve your auditors
Run your company like a public company for at least 2 quarters before
starting the IPO process
Ensure that your systems and controls are run through the simulator before
you head into deep space
Involve your auditors in a simulated quarter close
Simulate an earnings call and all of the prep work required
Perform annual audits of your financials
Have your auditors perform annual audits each year
As you near preparations for an IPO, prepare quarterly information
TripleLindy’s IPO Tips
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In the year or two leading up to an IPO, devote appropriate time to
developing relationships with investment banks and their analysts
Attend and speak at conferences
Get to know the analysts who cover your space and let them get to know
you
Ensure that your records are “squeaky clean” and create a dynamic data
room that you keep up to date on a regular basis
Review your stock and stock option records
Review your employment documents and material contracts – with
suppliers, customers, partners
Build the best IPO team you possibly can
Remember – You will be judged by the company you keep
Legal counsel, independent auditors, underwriters, compensation
consultant, D&O insurance broker and carriers, investor relations, stock
exchange, transfer agent, financial printer, stock administrator
TripleLindy’s IPO Tips
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© 2014 Protiviti Inc. An Equal Opportunity Employer.
IPO Readiness – What Should You Consider?
Call to Action - IPO Musts and Common Pitfalls
IPO Musts and Common Pitfalls
Musts
• Operate like a public company
• Develop solid infrastructure
• Assemble a superb team
• Establish excellent corporate governance
• Execute well planned positioning and communication strategy
• Develop a public company consciousness among employees
IPO Musts and Common Pitfalls
Common Pitfalls
• Under-estimating the effort required
• Failure to develop sound processes and infrastructure
- especially those around financial reporting
• Not having the right team assembled
• Not assessing IT infrastructure readiness
• Under-estimating the intrusiveness of being a public
company, including the time demands from the
investment community
This document contains material proprietary to Protiviti Inc. ("Protiviti"), a wholly-owned subsidiary of Robert Half International Inc. ("RHI"). RHI is a publicly- traded company.
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© 2014 Protiviti Inc. An Equal Opportunity Employer.
Today’s Moderator: Steve Hobbs
Steve Hobbs is Protiviti's Managing
Director leading the Public Company
Transformation solution. He works
extensively with a number of pre-IPO
companies in the social media, technology,
and consumer products industries. He has
served over 100 public companies during
his 30 year career with support in IPO
preparation & execution, M&A
transactions, international expansion and
numerous operational issues. He has
served on the board of directors of three
companies, one as Chairman and two as
Audit Committee Chair.