How Companies Go Public: Pathways, Process, and the Role of Securities Counsel

What Going Public Means

Going public means registering a company's securities with the Securities and Exchange Commission and making those securities available for public trading. This creates a permanent transformation of the company's legal obligations: once public, the company becomes subject to continuous SEC reporting requirements, insider trading restrictions, proxy solicitation rules, beneficial ownership reporting, and the anti-fraud provisions of federal securities law.

The decision to go public should be informed by a clear understanding of these ongoing obligations and the infrastructure required to meet them. Companies that go public without adequate preparation frequently encounter compliance failures in their first reporting periods, which creates immediate enforcement risk and undermines market confidence.

Pathways to Public Trading

There are several pathways to public trading, each with different regulatory requirements, timelines, and cost structures. The traditional IPO involves filing a Form S-1 registration statement, conducting an SEC review process, and pricing and selling shares through underwriters. Direct listings allow existing shareholders to sell without a traditional offering but still require SEC registration. Reverse mergers involve a private company acquiring a public shell company. SPAC transactions involve merging with a special purpose acquisition company. Form 10 registration involves filing a registration statement that registers existing shares for trading without a capital raise.

Each pathway has different implications for disclosure timing, capital structure, dilution, and ongoing compliance obligations. The choice of pathway should be driven by the company's specific circumstances, capital needs, industry, and regulatory posture, not by market trends or promotional claims about speed or simplicity.

The Regulatory Process

Regardless of the pathway chosen, going public involves SEC review of a registration statement. The SEC Division of Corporation Finance reviews these filings and issues comment letters requesting additional disclosure, clarification, or revision. Responding to comment letters is a critical phase of the going-public process and requires securities counsel who understands the staff's concerns and can draft responses that address those concerns while protecting the company's interests.

Beyond the SEC registration process, going public requires coordination with a transfer agent, application to a trading market (OTC Markets, NASDAQ, or NYSE), FINRA review in many cases, and establishment of internal compliance infrastructure including disclosure controls and procedures, insider trading policies, and board committee structures.

Common Mistakes Issuers Make

The most common mistakes in going-public transactions are not legal technicalities. They are structural: companies that go public without audited financial statements that meet PCAOB standards, companies that underestimate the cost and complexity of ongoing SEC reporting, companies that fail to establish adequate corporate governance before going public, and companies that make promotional public statements during the registration process that create Securities Act liability. Each of these mistakes is avoidable with qualified securities counsel involved from the outset of the process.