When a private company is in the process of going public, among the demands to adjust for are increased reporting obligations and the greater scrutiny associated with them. Much of this responsibility will fall on the desk of the Chief Financial Officer (CFO) – an IPO may not be something they have had experience of before and it can be quite overwhelming.
With so many things you can’t control happening, like shifts in the markets, geopolitical risks and macro-economic factors, preparedness of the key challenges here, as in every other phase of the IPO journey can be the difference between confidence and scrambling.
1) What’s the CFO’s main job in the 12 – 18 months before an IPO?
To convert a private-company’s finance function into a repeatable public-company reporting engine with tighter controls, audit-ready support and reliable disclosure processes so the business can withstand Securities and Exchange Commission (SEC), or other local authority, scrutiny and investor questions.
In the US coming under SEC oversight is a major step, with any company looking to transition needing to satisfy this regulatory body that it is meeting its obligations and abiding by the rules.
2) What are SEC reporting obligations for pre-IPO companies and when do these start?
Once you file a Form S‑1 registration statement, you enter SEC oversight and after listing these ongoing reporting requirements become the new baseline. You should familiarize yourself with the rules around pricing for pre-IPO shares, e.g. how Rule 144 (Restricted Stock) places a holding period (usually 6 – 12 months) on these before they can be sold, where volume limitations may apply and where these can carry over even after the company has gone public.
3) How should I think about 409A valuations as we approach an IPO?
If you grant options or other equity compensation, you need a defensible fair market value (FMV) process for common stock. Best practice is normally to use a qualified independent appraiser and keep strong documentation to support ‘safe harbor’ positioning. Be prepared to explain valuation methods, rationale and changes, because equity valuation and disclosures often draw attention during the SEC review process.
4) What filings must be operationally ready to deliver on Day 1 as a public company?
At a very minimum you should understand and be prepared for Form 10‑K (annual), Form 10‑Q (quarterly), Form 8‑K (reporting on material events) and proxy statements for shareholder voting and governance disclosures. Be familiar with the timings around these, e.g. a Form 8-K must generally be filed within four business days of the triggering event.
Key takeaway: The SEC reporting regime can change. Part of the ongoing challenges you’ll face is to ensure that you remain compliant over time. One way to help stay on top of the constantly evolving world of regulatory reporting on equity awards is to work with an experienced third-party, like J.P. Morgan Workplace Solutions.
5) What are some of the core pre-IPO ‘essential documents’?
Some of the documents that pull heavily on finance-owned data, controls and equity disclosures include:
- Engagement letter (reimbursement clause, gross spread)
- Letter of intent (preliminary deal terms, information commitments, potential overallotment option)
- Underwriting agreement (final economics/commitments; executed at pricing)
- Registration statement (Form S-1) (prospectus and additional SEC-required information)
- Red herring prospectus (preliminary S-1 missing final price/share count; used in marketing)
What cap table and equity compensation ledger clean-up is required before the S 1?
Reconciliation, reconciliation, reconciliation.
Get your cap table in order. Make sure your ownership story is clean with legacy issues identified and addressed.
Some common legacy issues include missing approvals, incorrect strike prices, undocumented amendments, side letters, inconsistent vesting terms, expired/cancelled awards not processed, grant terms, approvals, cancellations and amendments not documented. You should also ensure your 409A valuation process is current, independent, and well-documented as your IPO probability rises.
7) What equity awards should you offer post-IPO (and to whom)?
This will depend on a range of factors but many public companies consider:
- an all-employee plan (broad ownership/retention),
- an executive/key talent plan (performance alignment and targeted retention),
- RSUs for broad populations,
- hybrid programs (RSUs for most, options for select groups/markets),
- ESPP after IPO (broad-based ownership via payroll deductions; powerful but operationally demanding).
Key takeaway: Get agreement on and lock-in your company’s post-IPO equity philosophy early so share reserve planning, disclosures and operations all match. Document this and share with relevant stakeholders.
8) Regardless of equity type what governance should be in place?
Look to create a documented framework for plan approvals, grant delegation, insider trading controls, equity data reconciliation (cap table/admin/GL), and a quarterly cadence to support reporting and disclosure.
Consider:
- Where will we offer equity on Day 1, and where will we defer? Avoid accidental ‘global by default’.
- Who will be excluded and why? Look at regulatory barriers, FX controls, etc.
- How will withholding work at vest/exercise across countries? Identify payroll owners, funding, and establish timelines.
- Do you have the infrastructure for translations and localization? Standardize templates where possible.
- Country feasibility and compliance: Tax, FX controls, data privacy, local regulations and restrictions, etc.
- Clear decisions on where you will not offer equity initially to avoid unmanaged exceptions.
9) Can your existing equity plan administrator support post-IPO and global constraints without bespoke workarounds?
Set yourself up now so you don’t run into avoidable problems down the line. Even a well-designed equity compensation plan can fall short without a trusted administration solution, one that accurately records and processes grants, vesting, exercises and transactions, while also supporting compliance across relevant jurisdictions. When choosing an equity compensation software provider ahead of time ensure that they can take you through the IPO process and offer the types of equity you need, in al the jurisdictions where you intend on offering them.
How does J.P. Morgan Workplace Solutions support equity plan management for pre-IPO companies?
As CFO you need a close calendar, clear escalation paths and system support you can rely on.
J.P. Morgan Workplace Solutions combines the technology of a modern equity administration platform with global expertise and dedicated client managers to help companies, both private and public, manage their equity plans at scale – supporting equity plan administration, cap table management and global equity plan needs. The goal is simple: smarter stock plan solutions for companies and the people who power them.
This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.
This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.
