How To Conduct A Tech IPO/ICO

The SEC defines an Initial Public Offering (IPO) as when a company first sells its shares to the public. [1] Technology (Tech) companies distribute IPOs to raise the funding necessary for growth. Tech companies have raised approximately $4.3 billion in funding via IPOs by the third quarter of 2018.[2]

The process of starting an IPO is a long, exhaustive process which involves several layers of intense diligence by investment banks and lengthy filings with the SEC. The SEC requires specific corporate information to become open to the public.[3] During the initial phase of going public, the company and its financials must be prepared to withstand public scrutiny. Extensive due diligence is performed (by an investment banker) to prepare the company books to go public, underwrite the potential IPO, and determine the potential IPO’s value.

The Securities Act of 1933 requires companies to register securities sold on the U.S. market with the SEC. [4] These companies must file a registration statement (From S-1) with the SEC prior to going public.[5] A Preliminary Prospectus is filed as the first draft of the registration statement which includes the pertinent information found in the due diligence process. Once the preliminary prospectus becomes effective, the company will then file a final prospectus to include the IPO’s price range and amount of stock issued.

When conducting an IPO, a tech company must consider that sensitive information might be made public. The value of Intellectual Property is part of the analysis used to determine the price of the company’s IPO. This information may consist of trade secret information and expiration dates of patents. By releasing this information, the company is now open to varies IP related issues which can put a strain on the IPO. Tech companies with considerable IP investments must take the necessary steps to prevent IP issues from arising, pre and post IPO.

Tech companies may also place Initial Coin Offerings (ICO) on the market to raise capital. Similar to IPOs, the ICO process involves registering with the SEC. However, ICO generally does not fall under the SEC’s jurisdiction over securities.[6] Therefore, filing a registration statement with the SEC is not required. Companies that are issuing ICOs, file a Regulation D exception which, will allow them to trade their ICO without registering it as a security.

The first steps to issue an ICO is to create a product and a token. The token/coin will be used to purchase interests in the product.[7] The token and product are then described in detail on a “White Paper” which is published to inform the market of the ICO.


[1] https://www.sec.gov/fast-answers/answersipohtm.html

[2] https://www.pwc.com/us/en/services/deals/q3-2018-capital-markets-watch.html

[3] https://www.investopedia.com/articles/investing/080613/road-creating-ipo.asp

[4] https://www.sec.gov/answers/about-lawsshtml.html#secact1933

[5] https://www.sec.gov/files/forms-1.pdf

[6] https://www.sec.gov/ICO

[7] https://medium.com/swlh/how-to-launch-an-initial-coin-offering-7fa000ba3f59

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