From the first draft to pricing
The core document is the registration statement, which includes the prospectus investors read. Many issuers can submit an early draft to the SEC confidentially, and the staff responds with comments that the company answers in revised drafts, sometimes over several rounds. Once the filing is public and the comments are resolved, management usually goes on a roadshow with the underwriters while the order book builds. The registration statement is then declared effective and the offering is priced, usually close together, and trading begins. The underwriting agreement is negotiated in parallel with the prospectus, and each stage produces its own set of documents and sign-offs.
Who answers for the prospectus
Federal securities law places responsibility for a misleading registration statement on a wide group, including the company, its directors, the officers who sign, and the underwriters. Most of those parties other than the company can defend themselves by showing they made a reasonable investigation, which is one reason the process is so document-heavy and why directors are asked to read drafts closely rather than skim them. Officers and directors should understand what their insurance will cover and how indemnification works once the company is public. Selling shareholders, if there are any, give representations of their own in the underwriting agreement. Send questions and comments on drafts through counsel, since the record of what was asked and answered can matter later.
Holding shares through the offering
Founders, employees, and early investors usually sign lockup agreements that restrict selling for a period after the listing, and the terms, including any early-release provisions, are negotiated with the underwriters. After that, insider sales run through the company's trading policy and trading windows, and often through written trading plans adopted in advance. Directors and officers also take on public reporting of their own transactions in company stock. Equity awards may need to be restructured before the offering, and the tax treatment can change depending on how and when that happens. Early on we map what each holder can and cannot do at each stage, so that nobody learns the rules from a missed filing.
