The mega law firm Skadden Arps has just published a primer for companies thinking about going public, the long-dormant means by which venture investors can exit a successful business and thereby redeploy their risk capital to a new opportunity. The very first paragraph of the preface is instructive:
The market for Initial Public Offerings (IPOs) has never been more complex or challenging than it is today. The legacy of the financial crisis, and the economic volatility that continues to impact the markets, have made investors even more diligent in their scrutiny of IPOs. In addition, new legislation introduced since the crisis has only added to the complexity of these transactions. In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Jumpstart Our Business Startups Act (JOBS Act) have added many new requirements and considerations to the IPO process.No mention of SOX 404 -- the requirement for a separate "internal controls" audit -- which is a huge and costly burden on small companies, but the facts are clear: We have taken away the IPO exit for all but the very most successful companies. That has, in turn, depressed our willingness to invest in start-ups, because it lowers the odds of a return of capital.
Editorializing aside, it looks like a great document for any entrepreneur considering his or her first IPO.