Running a Public Company

Praise for Running a Public Company: From IPO to SEC Reporting "Steve Bragg's book is an essential read for anyone contemplating a public offering or taking on leadership responsibility in a public company. Not only does he explain the complicated aspects of registration and reporting, he provides practical examples of policies, procedures, and controls to keep a public company on the right track. This book is easy to follow and will continue to be a resource for the reader."—Tom Wilkinson , PMB Helin Donovan, LLP "I will recommend Running a Public Company: From IPO to SEC Reporting to my clients and consulting colleagues as an excellent resource. The book provides helpful guidance about the decision to go public, and about managing the requirements once a company is public. Steve Bragg's extensive knowledge stems from actual business experience, and his writing style makes a complex topic easier to follow and understand."—Valerie G. Walling, CPA, CMC, Management and Internal Controls Consultant "I highly recommend Steve's new book, Running a Public Company: From IPO to SEC Reporting, because it's a reference manual and insider's guide that contains a treasure trove of valuable insights certain to help managers, accountants, and attorneys navigate through the countless challenges that arise when taking (and keeping) a company public."—Matthew Posta, Esq., CPA, Vice President of Finance, Key Air, LLC "Mr. Bragg has done an excellent job of demystifying what is required to run your company and sell your stock in the public markets. I consider this a must-read for anyone considering a public offering or working with a public company."—Wray Rives, CPA "Running a Public Company: From IPO to SEC Reporting is an incredibly exhaustive guide to going public, spanning the process from first deciding to take the leap to filing with the SEC and everything in between—so comprehensive that it even includes the SEC's account number for paying filing fees! This is yet another Steven Bragg title for professionals that takes a complicated and oftentimes confusing process and breaks it down into simple, easy-to-follow steps. Should our company ever decide to make that jump, it is reassuring to know that Running a Public Company has laid out the path before us in perfect detail. Whether used as a reference or a guide, Mr. Bragg makes the process simple, clear, and amazingly straightforward."—Adrienne Gonzalez, Project Coordinator, Roger CPA Review, Chief Information Officer, JrDeputyAccountant.com "The first A to Z guide that I have seen. An excellent reference for management and investors alike."—Brian A. Lebrecht, Esq., President, The Lebrecht Group, APLC

About the Author xiii Preface xv Part I How to Go Public 1 Chapter 1 The Initial Public Offering 3 Introduction 3 Reasons to Go Public 3 Reasons Not to Go Public 5 The Cost of an IPO 7 Preparing for the IPO 7 Finding an Underwriter 10 Registering for and Completing the IPO 14 Summary 18 Chapter 2 Acquiring a Public Shell Company 19 Introduction 19 Pros and Cons of Acquiring a Public Shell Company 19 The Mechanics of a Shell Company 21 Summary 22 Chapter 3 Listing on a Stock Exchange 23 Introduction 23 The Listing Process 23 The American Stock Exchange 24 The NASDAQ 27 Overview 27 The NASDAQ Capital Market 27 The NASDAQ Global Market 27 The New York Stock Exchange 29 Comparing the Stock Exchanges 31 Summary 33 Part II Dealing with Investors 35 Chapter 4 Investor Relations Overview 37 Introduction 37 Investor Relations Objectives and Goals 38 Investor Relations Tools 39 The Fact Sheet 41 The Press Release 42 The Annual Report 46 The Annual Meeting 48 The Company Web Site 49 The Road Show 54 The Conference Call 55 Float Management 57 Summary 59 Chapter 5 The Investment Community 61 Introduction 61 The Analyst’s Perspective 61 Finding the Right Analyst 63 The Sell Side 64 Analysts 64 Brokers 67 Investment Bankers 69 Investor Relations Specialists 70 The Buy Side 70 Types of Investors 70 Institutional Investors 71 Individual Investors 73 Investment Clubs 75 Foreign Investors 76 Presentations to Investors 76 Summary 77 Chapter 6 Regulation FD (Fair Disclosure) 79 Introduction 79 Policies 80 Procedures 82 Controls 83 Summary 86 Chapter 7 Stock Repurchases 87 Introduction 87 Impact on Earnings per Share 87 Legal Ramifications 88 SEC Reporting 89 Adequate Disclosure and Repurchase Instructions 90 Impact of Repurchases on Rule 13e-3 91 Summary 91 Part III Dealing with the Securities and Exchange Commission 93 Chapter 8 Registration Statements 95 Introduction 95 Form S- 1 95 Form S- 3 98 Form S- 8 99 The Shelf Registration 100 Declaring a Registration Statement Effective 100 Controls 101 Summary 102 Chapter 9 Regulation D (Sale of Unregistered Securities) 103 Introduction 103 Policies 104 Procedures 105 Controls 109 Summary 112 Chapter 10 Rule 144 (Registration Exemption for Resale of Securities) 113 Introduction 113 Procedures 115 Controls 115 Summary 117 Chapter 11 Rule 10b5-1 (Stock Trading Plans) 119 Introduction 119 Policies 122 Summary 123 Chapter 12 Regulation A (Small Issue Exemption) 125 Introduction 125 Policies 127 Procedures 127 Controls 129 Summary 132 Chapter 13 Fedwire Payments 133 Introduction 133 Summary 135 Chapter 14 Form 8-K 137 Introduction 137 Controls 144 Summary 145 Chapter 15 Insider Securities Ownership and Trading 147 Introduction 147 SEC Filing Codes 151 Short-Swing Profits 153 Short Sales by Insiders 154 Policies 154 Controls 154 Summary 154 Chapter 16 Proxy Solicitations 157 Introduction 157 Online Proxy Voting 161 Policies 164 Procedures 165 Controls 169 Summary 170 Chapter 17 Regulation M-A (Mergers and Acquisitions) 171 Introduction 171 Policies 174 Procedures 177 Controls 179 Summary 182 Chapter 18 Private Securities Litigation Reform Act (Forward-Looking Statements) 183 Introduction 183 The Private Securities Litigation Reform Act 184 Forward-Looking Statements 185 Policies 188 Procedures 189 Controls 190 Summary 193 Chapter 19 Sarbanes-Oxley Act 195 Introduction 195 The Public Company Accounting Oversight Board 195 Auditor Independence 197 Corporate Responsibility 198 Enhanced Financial Disclosures 201 Analyst Conflicts of Interest 202 Other Significant Parts of the Act 203 Summary 204 Part IV Special Accounting Standards for a Public Company 205 Chapter 20 Interim Reporting 207 Introduction 207 Example of Interim Reporting of Various Expenses 208 Second Example of Interim Reporting of Various Expenses 209 Policies 210 Procedures 210 Controls 211 Disclosures 212 Summary 213 Chapter 21 Segment Reporting 215 Introduction 215 Policies 217 Procedures 219 Controls 220 Disclosures 220 Summary 222 Chapter 22 Earnings per Share 225 Introduction 225 The Simple Capital Structure 225 Example of EPS Computation—Simple Capital Structure 226 Preferred Stock Dividends Payable in Common Shares 230 The Complex Capital Structure 231 Example of the Impact of Contingent Stock Issuances on Earnings per Share 232 Examples of EPS Computation—Complex Capital Structure 235 Participating Securities and the Two-Class Method 240 Example—Participating Convertible Preferred Stock 241 Example—Participating Convertible Debt Instrument 242 Example—Participating Warrants 243 The Effect of Contracts That May Be Settled in Stock or Cash on DEPS 244 Inclusions/Exclusions from Computation of DEPS 245 The Effect of Contingently Convertible Instruments on DEPS 245 Example—Contingently Convertible Debt with a Market Price Trigger 246 Effect on EPS of Redemption or Induced Conversion of Preferred Stock 246 Earnings per Share Implications of Share-Based Employee Compensation 247 Presentation of Earnings per Share 248 Controls 249 Summary 250 Chapter 23 Staff Accounting Bulletins 251 Introduction 251 Selected Staff Accounting Bulletins 252 Summary 255 Chapter 24 Regulation G (Non-GAAP Information) 257 Introduction 257 Policies 258 Procedures 259 Controls 261 Reporting Examples 262 Summary 264 Part V Closing The Books of A Public Company 267 Chapter 25 Constructing and Filing the Quarterly 10-Q and Annual 10-K Reports 269 Introduction 269 Constructing the SEC Filing 269 Quarterly Auditor Reviews and Audits 276 Quarterly Legal Review 279 Officer Certification 279 Audit Committee Approval 280 EDGARizing 281 Summary 283 Chapter 26 Controls for Financial Reporting 285 Introduction 285 Controls for Financial Reporting 285 Summary 295 Part VI Going Private 297 Chapter 27 How to Take a Company Private 299 Introduction 299 The Going Private Transaction 299 Rule 13e-3 300 Filling Out Schedule 13E-3 301 Form 15 304 The 300 Shareholder Limit 304 Summary 305 Appendix A Board Questionnaire 307 Index 311