The New York Stock Exchange officially turns 197 in March. Originally called the New York Stock & Exchange Board, its first constitution was signed on March 8, 1817. It's roots go even further back, however. The rules for buying and selling shares of companies were agreed upon back in May 1792 by a group of 24 stockbrokers. This agreement was known as the Buttonwood Agreement.
Over the course of two centuries, a lot has changed. Today's companies considering going public have much to consider as well as technology that was unimaginable back then.
Going Public on the NYSE
Going public is a major decision that will change the way the company does business. While you may be accustomed to doing your own thing while running a private business, going public brings new requirements, accountability, and obligations. Before deciding to go public, owners and CEOs of private companies should carefully consider their reasons. For example, do you want to go public to diversify, provide liquidity for shareholders, raise capital and expand, or to boost your company's status? While there's no right or wrong reason, you should be clear about why you want to go public.
Another consideration involves whether your company is ready to go public. For example, does your company have a successful track record, consistent strong growth, or big enough draw to attract investors? What about your leadership team? Does your team have the experience and credibility to inspire confidence? Even if you feel that going public is the right move, your company still may not be ready as the New York Stock Exchange has specific entry requirements.
Can You Handle the Paperwork Requirements of Going Public?
Back in 1817, there was no Sarbanes-Oxley Act to complicate the process. Today, this legislation along with a myriad of other requirements make preparing for an IPO extremely complicated. The Sarbanes-Oxley Act of 2002 specifies numerous pre-IPO requirements along with the publication of reports that evaluate the effectiveness of the company's internal control over financial reporting. Each year, an external auditor must report on this as well.
Another area of concern when going public involves sharing confidential data to the right people, and only to the right people. In the year or so leading up to an IPO, your management team will need to share sensitive financial documents with internal and external parties such as lawyers, accountants, investment bankers, and auditors.
Sending these documents using email or a shared folder is risky, and you have no way of controlling what happens to those documents once you hit the "send" button. Virtual data rooms are crucial for any company preparing to go public. A virtual data room ensures that only authorized individuals have access to your sensitive files. Even then, built-in NDAs, watermarks, and audit logs provide additional control over your corporate documents. You can even prevent files from being printed or copied.
If you're thinking of celebrating Wall Street's birthday by going public, you have a big job ahead of you. In the meantime, happy birthday NYSE!