Companies that pursue IPOs face scrutiny from the moment they announce their intentions. Initial filings and roadshows designed to attract investors can draw attention from regulators, the public, and plaintiffs' attorneys.
Some of the biggest risks during the IPO journey include:
- Inadequate preparation: Companies that intend to become public may need to upgrade their accounting, reporting systems, and governance practices. Companies may wish to enlist the assistance of financial, legal, and risk professionals with experience serving public companies. Beginning this work prior to the IPO can smooth the transformation.
- Failure to complete the IPO: The inability to execute an IPO may be interpreted as an underlying problem and trigger litigation.
- Misleading statements: Statements and disclosures are critical information for investors. A materially misleading statement or omission can become the basis of a lawsuit against the company, and its directors and officers.