How to Prepare and File the S-1 for an IPO

An Initial Public Offering (IPO) is a significant milestone for any company. An IPO allows for private companies to offer shares to the public for the first time. Companies go public for a variety of reasons, including attaining additional capital to fuel growth, increase market visibility, which potentially attracts more customers and business opportunities, and to create the opportunity to provide liquidity for existing shareholders.  

What is an S-1 Filing?  

The S-1 registration statement is a critical document that companies must file with the U.S. Securities and Exchange Commission (SEC) before going public. This document provides potential investors with detailed information about the company’s business operations, financial condition, and the planned use of capital proceeds.  

How to Prepare and File the S-1  

Assemble a strong Team  

This includes legal counsel to navigate the complex regulatory requirements, accountants and auditors to make sure the financial statements are accurate and comply with SEC regulations, and investment bankers to underwrite the IPO and help with pricing and marketing the shares. 

Include Audited Annual and Reviewed Interim Financial Statements  

Comparative annual financial statements need to be audited by a reputable accounting firm registered with the Public Companies Accounting Oversight Board (PCAOB) to ensure accuracy and compliance with SEC requirements. In addition, for the period since the last annual financial statements, interim quarterly financial statements, reviewed by the auditor, will be required for the most recent period and its prior year comparative period. 

Draft the S-1 Document  

This includes the prospectus to describe the business, market opportunity and competitive landscape, risk factors that could impact the business and value of the shares, the MD&A to offer insights into the financial condition, results of operations and prospects, the use of proceeds to explain how the funds raised from the IPO will be used, and the financial statements, including the footnotes. The S-1 will typically be created by the attorneys, including a draft of the risk factors that should be tailored. For the business section, management, including those in sales and marketing, as well as operational roles, will provide input in describing the business. The MD&A is prepared by the company’s financial personnel and may leverage outside experts to assist in the preparation.  

Submit the S-1 Document to the SEC  

The filing is through the EDGAR system. Expect and be prepared for multiple rounds of comments from the SEC staff. 

The SEC Review Process for Your S-1 Filing  

Companies can file the S-1 confidentially, which means the details of the filing are not disclosed to the public initially. Advantages to this confidential filing allow for companies to gauge investor interest and get feedback from the SEC without public scrutiny. This allows for companies to avoid market speculation while being able to refine their disclosures based on SEC feedback before making the information public.  

If the SEC feedback is not favorable, companies can withdraw the filing without public knowledge. The confidential S-1 must be made public at least 15 days before the company starts its investor roadshow. 

SEC Assignment and Review Scopes  

Once the company submits its S-1 filing (confidential or not), the SEC assigns the filing to staff, which are attorneys and accountants with specialized expertise in the relevant industry. The scope of the SEC review varies from a full review, a financial statement review, and a targeted issue review.  

The full review is a comprehensive review of the entire filing for compliance with all applicable standards and regulations. The financial statement review focuses on the financial statements and related disclosures. The targeted issue review concentrates on specific areas of the filing. Once the S-1 is submitted, the SEC aims to provide initial comments within approximately 30 days. 

SEC Comment Letters and Company Responses  

The SEC staff will issue comment letters to the company for any issues identified or areas needing clarification. These letters may request additional information, revisions to the document or further explanations. The company must respond to the SEC comments, which should include providing the requested information or making changes to the filing until the SEC is satisfied.  

Timely and comprehensive responses to these letters are critical to avoid delays in the review process as it's likely for there to be multiple rounds of comments leading to amendments to the S-1 filing based on the SEC’s comments. Once all comments have been addressed, the SEC will declare the S-1 effective. This allows the company to proceed with its IPO. 

Timeline and Avoiding “Stale” Financial Statements  

Overall, the SEC review process could take up to 6 to 12 months, depending on the nature of the comments. If too much time passes since the end of the period covered by the financial statements and the filing date of the registration statement, the financial statements are considered “stale” as they are no longer current according to SEC rules.  

Key timeframes to remember are 135 days. If a company’s year-end is December 31, the annual financial statements would go stale on May 15 of the following year. If the most recent quarter ends on March 31, the financial statements would go stale on August 13. To avoid staleness, companies must update their filings with more recent financial information. Close coordination with auditors and legal advisors is essential to ensure timely preparation and review of updated financial statements. 

Avoiding Common Challenges When Filing the S-1  

Assembling the right team with experienced professionals is critical to help avoid these common challenges as this team will guide you through the process. 

Incomplete or inaccurate information, specifically financial statements, can lead to delays and additional SEC comments. All information provided must be complete and accurate to avoid delays or rejections. Work with experienced accountants to ensure the financial statements are accurate. 

Don’t underestimate the amount of time and resources required to go through the S-1 process. It is time-consuming and can be overwhelming. Start preparing early and stay organized.  

Inadequate disclosure of risk factors can lead to legal issues and investor mistrust. Be transparent about all potential risks associated with your business. Detailed descriptions of market, operational, regulatory and financial risks should be included. 

The SEC review process can be prolonged with multiple rounds of comments. Be thorough and prompt in the response to SEC comments. Engage with your team of experts (legal and financial advisors) who have experience with SEC filings to help address the comments effectively.  

S-1 Filing Frequently Asked Questions  

• What is the purpose of an S-1 filing? To register a company’s securities with the SEC before going public. 
• Who is required to file an S-1? Any company planning to go public in the United States is required to file an S-1 with the SEC. This includes both domestic and foreign companies. 
• What are the key components of an S-1 document? The prospectus, the financial statements, the risk factors, and the MD&A. 
• How long does the SEC review process for S-1 filings typically take? Depending on the complexity of the filing and the responsiveness of the company to comments from the SEC, the SEC review process typically takes between 6 and 12 months. 
  
  

Key Takeaways: S-1 Filings for IPOs   

Filing an S-1 for an IPO is a complex and time-consuming, but crucial step in taking your company public. Preparation, transparency and professional guidance are key to avoiding common pitfalls in the IPO process. Assembling a team of industry experts is critical to navigate the regulatory landscape of the IPO process. By understanding the requirements and preparing thoroughly, you can navigate this process and successfully launch your IPO.  

Use our IPO readiness assessment to help identify areas of strength and weakness as you proactively plan and prepare before starting the process.