A Lawyer’s Guide to IPOs [PODCAST]
I recently had the opportunity to sit down with host, Renee Karibi-Whyte, to discuss initial public offerings (IPOs). 2016 was a lackluster year for IPOs, with approximately 102 filed by US and foreign issuers that raised more than $16.6 billion. This is down from 2015, which had 153 IPOs that raised more than $23.9 billion, as well as 2014, where there were 254 IPOs that raised more than $73.3 billion.
In the episode entitled “A Lawyer’s Guide to IPOs,” I explored what IPOs are, the role that attorneys play in establishing them, and where the IPO market is headed in 2017. Below are some takeaways from the conversation.
Many companies are increasingly issuing dual class share structures. In order for the founders of companies to maintain a controlling stake in their organizations, many are adopting dual class share structures—which means the class of shares held by the founders comes with more votes than the publicly-held class of shares.
It’s unclear what effect the new administration will have on the IPO market. The Obama administration enacted a number of laws that were designed to lift undue regulatory burdens on IPOS and to encourage smaller businesses to go public. While the new administration has made pro-business statements that have generated enthusiasm and a lot of excitement in the business community, it remains to be seen what the new regulatory landscape will look like and what effects this new landscape will have on the IPO market.
For some companies, it makes more sense to remain private. As private equity and venture capital funds continue to raise and deploy large amounts of capital, many companies are opting to remain private. Ultimately, one of the main purposes of conducting an IPO is to raise capital, but if businesses can obtain the same amount of capital privately while avoiding the challenges associated with becoming a public company, they may never choose to become a public company.
Non-U.S. stock markets are becoming more attractive. When some foreign companies learn about the requirements of becoming public in the United States, they are often surprised at how onerous the process is here compared to their home jurisdictions. Because of this and the increasing popularity of non-U.S. securities exchanges, many foreign companies are choosing to list their securities in non-U.S. jurisdictions.