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Your First SEC Filing: Get to Know the S-1

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Clancy Fossum. September 10, 2019 . IPO, SEC

Your journey towards your IPO isn’t always straightforward. In fact, it requires an organized approach to prevent you from getting lost in the financial woods. And while that’s a topic we’ve discussed in the past with our pre-IPO timeline, there’s a particular stop along that journey that carries so much weight, it deserves it’s very own moment in the spotlight -- your S-1.

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Since preparing your S-1 isn’t exactly an everyday occurrence, it has the habit of making even veteran CFOs sweat a bit as their teams dig into a painstaking process that is often outside of their expertise. But does that mean the S-1 is inevitably a drawn-out and all-consuming experience? Of course not, and your friends at Embark are here to shed some light on the topic, along with a few other helpful insights, to ensure your one-way trip to Public Company City is as smooth as possible.

 

What Is an S-1 and Why Does It Matter?

So what exactly is an S-1? Well, there’s always the technical definition -- a registration filing for a public offering under the Securities Act of 1933 that includes, amongst other things, your prospectus, number of shares, and price per share. Although that definition perfectly summarizes the function of your S-1 filing, it doesn’t really fill in the gaps regarding its true utility.

Your S-1 describes where you are as a company, where you want to be down the road, and how you intend on getting from point A to point B. Granted, that’s a simplified look at an S-1, but that’s essentially the role it plays. Think of the filing as your company’s story, a biography written for investors to maximize transparency and information.

Your S-1 is data-driven, meticulous, and requires abundant planning to give investors the insights they need to make well-informed decisions. Naturally, this means the S-1 isn’t something you prepare and file on a whim, but takes a coordinated effort to generate the required financial data and deliver it in a timely fashion. Given the importance of the filing, many CFOs prefer to bring in a third-party to lead the charge, coordinating the data to make certain the IPO is a springboard to bigger and better things rather than a lead weight in the middle of the Pacific.

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Helpful S-1 Hints

As you might’ve guessed, the team at Embark knows its way around an S-1, having helped countless clients prepare themselves for a successful IPO. That said, we’ve collected quite the collection of helpful S-1 hints, most of which are hard to come by in the big ol’ interwebs since they stem directly from our hands-on experience.

 

Bring a Lunch

The S-1 isn’t like filling out your 1040. It doesn’t neatly condense all of your financial information into a couple of pages but, instead, is expansive and detailed, sometimes hundreds of pages long. In fact, the SEC’s S-1 template alone is eight pages of somewhat fine print. That’s why preparation is so necessary, where your team really needs to be firing on all cylinders to make the process seamless and drama-free. In other words, it doesn’t come together overnight but is a months-long effort. To that point, as it says on the S-1 form itself, the Office of Management and Budget estimates the average time spent on an S-1 is 671 hours, a figure that is foreboding to say the least.

 

Coordination Is Key

While the basic sections of an S-1 are uniform, how a firm completes those sections can vary greatly by company and industry. A workflow that suits oil & gas might not do any favors for a healthcare organization, and vice versa. Therefore, coordinating by your company’s background, data, structure, and stakeholders is vital. Your S-1 will contain sections devoted to legal & compliance issues, risk, historical information, and others, so bring the parties needed to complete those sections into the process early to prevent bottlenecks that can easily throw you off your filing timeline and effective date.

 

Have Your Financials Ready

Obviously, your financials are a critical component to your S-1 filing. Depending on the timing of your filing, that will include either your audited year-end statements or your most recent quarterly financials. You’ll also want to include key metrics like EBITDA that investors will pore over as well as non-GAAP measures typically evaluated within your industry. This is an area where your underwriters can be of great benefit since they are extremely familiar with the process and, more often than not, what investors expect from companies in your particular industry.

 

Pro Formas

Chances are your financials will change -- often drastically -- after your liquidity event. For example, maybe you’ll retire a significant amount of debt with the capital, meaning your interest expenses will be quite different than what they are today. That’s valuable information for investors that makes pro formas an important piece of the S-1 puzzle.

Your company’s life as a public company will not be the same as its private days, so your pro formas give investors a snapshot of what they can expect after your IPO. However, this is often the most time-consuming component, so make sure you start early and use a format that allows you to quickly and easily make changes as new data comes in. Otherwise, you’re constantly reinventing the pro forma wheel which, for obvious reasons, would make an already painstaking process even more difficult.

 

Work Smart

Just like many processes in your finance and accounting functions, technology can be immensely helpful in creating new efficiencies, value, and accuracy in your SEC filings, the S-1 included. While you’re more than welcome to tackle your filing manually, limited time, resources, and sanity might say otherwise. Imagine being in a position where a single digit changes in your financials, and that figure is spread across your S-1 in 20 different places. Failing to update just one of those places can have severe consequences on your public offering and how investors view your organization.

Instead, several different platforms within the marketplace can automate significant portions of your filings, including everything from data updates to generating the final document itself. Remember, you’re more than likely going to file multiple S-1s as refined data comes in, so anything you can do to lend efficiency to the process goes a long way in keeping your team on-track since they’ll have their everyday responsibilities to handle as well. As the saying goes, there’s only so much time in the day.

 

Leverage Your Technology

Building on that last point, although the technology exists to supercharge your filing processes, a dedicated platform simply isn’t feasible for all companies. If, for instance, your budget doesn’t have the legroom you would need for a filing platform, there are plenty of other things you can do with your existing technology to streamline your S-1 preparation.

Using our previous example, try linking sheets and cells within Excel so when you update that single digit in 20 different places, those links will update all 20 at once. We will say, however, that looking ahead and clearing some room in your budget for a dedicated filing platform might be the best decision you’ll make, especially if you’re facing a particularly dynamic process with continuously changing data points and accompanying language.

Read Next: Which SEC Filing Software Is Right for You?

 

Delegate Leadership

What happens when a ship is missing a rudder? Things go sideways fast. Whether you’re using the most advanced technology or simple spreadsheets, you’re going to want to appoint a lead that serves as an overseer and, depending on the circumstances, a point of contact for other departments or third-parties.

This team leader will keep everyone on-track, on-time, and focused, helping to smooth information bottlenecks and generally add efficiency wherever and whenever possible. Look at your S-1 as you would any massive project within your operations where, despite machinery and software to streamline your efforts, a project manager is still essential to your ultimate success.

 

A Second Set of Eyes

No matter how broad your perspective or skillful a team you have, it’s still easy to slip into a bout of tunnel vision and lose sight of the filing forest through the trees. For that reason, it’s helpful to bring in a second set of eyes to review your data and your language, particularly in the management discussion and analysis (MD&A) portion of your S-1. That review helps ensure your conveying information in the clearest, most precise way possible and not leaving ambiguities for investors to interpret. To help the reviewer, make sure to tie-out all of your data throughout the document to properly substantiate the information and make it easy to trace your sources.

 

Understand Your S-1 Filing Requirements

The filing requirements for your S-1 aren’t necessarily going to be the same as the company’s down the block that went public last year. For instance, large accelerated filers have different requirements than smaller or emerging growth companies (EGCs), so you need to understand where you fit and what regulators and investors expect of your filing.

The SEC doesn’t maintain those different requirements to keep you on your toes, but as a measure of flexibility to account for the varying resources and knowledge bases within different companies. As an example, if you’re considered an emerging growth company, the SEC allows you to submit certain filings confidentially, providing feedback on your submissions to help ensure you have all your filing ducks in a row, all without the entire investing world knowing about your process and stumbling blocks.

 

The Importance of an External Reporting Group

Many private companies don’t have a team devoted specifically to external reporting. If you happen to fall into that category, we advise to get such a group up and running as early in the process as possible, preferably at least a year in advance. Not only will this help make sure your data is in decent shape -- a notion that will likely be forced upon you if you have PE/VC investors -- but will also help your team avoid burnout as time gets skinny and pressure mounts.

 

EDGAR Is Your Best Friend

You’re not the first company to go public, nor will you be the last. Don’t feel the need to chart new territory with your S-1 or undertake it without some examples to help lead the way. Get well-acquainted with EDGAR, buy him a nice lunch, and don’t hesitate to look at the S-1s from similar companies within your industry for guidance. Now we’re not saying to copy-and-paste giant swaths of text from another firm’s filing, but there’s absolutely nothing wrong with walking in their footsteps here and there, assuming they were solid footsteps to begin with.

Download: The Roadmap to Implementing SOX Compliance


Above all else, keep in mind that you’re putting an appealing but accurate and truthful spin on your company’s story. You end goal is to make your organization as attractive to investors as possible, and that’s not something you should take lightly or without enormous amounts of preparation. Of course, that’s why Embark exists in the first place, to help your company reach its goals and potential. So if you find yourself treading water or, even worse, sinking in the S-1 seas, we’re always here to help lead you ashore.

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