The Initial Public Offering, A Guidebook for Executives and Boards of Directors
By Patrick J. Schultheis, Christian E. Montegut, Robert G. O'Connor, Shawn J. Lindquist and J. Randall Lewis
Second Edition; Bowne & Co. Inc.
2004, 224 pages
After the scandals of Enron and Worldcom, the escalating cost of D&O
insurance, and the burdensome new regulations imposed by the Sarbanes-Oxley
Act and the stock exchanges, it's a surprise that many executives and
boards of directors would still be interested in taking their companies
public. For those that are, however, this book is a must-read, as it
contains a wealth of information about the process of going public. The
authors clearly know what they are talking about. They should — this
second edition of the Initial Public Offering guidebook is written
by five lawyers with Wilson Sonsini Goodrich & Rosati, the firm that
has handled more public offerings in the United States over the last five
years than any other law firm.
The Initial Public Offering guidebook is well organized. It begins
with chapters on the pros and cons of going public and advice on assembling
the IPO team and preparing the company for the offering. The book continues
with an in-depth discussion of the legal framework for the offering and the
process of preparing the registration statement and negotiating the
underwriting agreement. It then concludes with advice on managing relations
with Wall Street and dealing with periodic reporting requirements as a
public company.
There is even a separate chapter addressing special considerations for
non-U.S. companies. Since this book was published before new rule changes
were adopted by the SEC in June 2005, however, some of the discussion is
already out of date.
The chapters on preparing for the offering, restrictions on publicity and
the due diligence process are particularly helpful. The authors give a
great deal of practical advice on how to deal with issues that sometimes
arise when a company is preparing to go public, such as cheap stock issues.
The chapter on due diligence outlines the statutory basis for the due
diligence defense and includes examples of poor due diligence (largely
drawn from the court's decision in Escott v. BarChris, 283 F. Supp.
643 (S.D.N.Y. 1968), which is still the leading case on due diligence in a
public securities offering) and good due diligence (drawn from several
recent decisions, an NASD proposal, and, presumably, the authors' own
experience).
Sprinkled throughout the book are sidebars with practical tips on steps to
take or problems to avoid in an offering, and the authors draw on their
collective experience to provide numerous real life examples.
Surprisingly, the book contains relatively little information about the new
burdens imposed by the Sarbanes-Oxley Act. Although Sarbanes-Oxley is
discussed in several chapters, including those addressing the pros and cons
of going public, it is not given much focus. Given the number of public
companies exploring the possibility of going private as a result of
Sarbanes-Oxley, greater warning should be given to those executives and
board members — at least those at smaller companies —
considering taking the IPO plunge.
Despite these omissions, all in all this book provides an excellent
overview of the offering process. The book is advertised as a guidebook for
executives and boards of directors, although it contains much more
information than most executives or board members would likely take the
time to read. In fact, it would be best suited for an in-house counsel of a
company considering going public. It would also serve as good introductory
material for a junior associate joining a law firm that has an active
securities practice.
Nevertheless, board members and executives — in particular, in-house
counsel — of any company seriously considering going public should
read this book. The price is certainly right, as copies are available free
through Bowne, the financial printing firm. It can be requested from any
local office of Bowne or it can be downloaded at Bowne's Web site at
www.bowne.com/bsc/pub3_ipo.asp.
Grayson is a partner at Nelson Mullins Riley & Scarborough LLP, in
Greenville, S.C. His e-mail is neil.grayson@nelsonmullins.com.
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