Longtime business journalist Francine McKenna spoke with Ryan Teague Beckwith of “My First Byline” about covering initial public offerings.
Here is an excerpt:
What should journalists and investors look for in an S-1?
The SEC says investors should look at:
• The Prospectus Summary for information about the company’s business, strategy, plans for using the funds raised in the IPO and financial condition, as well as the terms of the IPO itself.
• The Risk Factors for risks that the company’s management feels could significantly impact the company’s business, operations or performance, or an investment in the securities being offered.
• The Use of Proceeds to find out what company plans to do with the money it raises in the offering.
• The Dividend Policy for the company’s history of paying, and possibly its plans to pay, dividends to shareholders.
• The Dilution data for an understanding of the usually significant disparity between the price that investors are paying for shares in the company’s IPO to both (1) the book value — t he value of a company’s equity divided by the number of shares outstanding— of such shares and (2) the average price paid by existing shareholders that include founders, officers and early investors.
• The selected financial data discloses certain key financial and other data in a summarized column format. Companies are generally required to disclose selected financial data for the prior five years. However, if the company is an “emerging growth company” this disclosure can be limited to the prior two years.
• The Management Discussion and Analysis is a narrative of management’s perspective on the company’s financial condition, changes in financial condition and results of operations.
• There is also additional information about the lines of business, principal products or services and their markets, any significant suppliers and customers on whom the company’s business depends, and the competitive landscape and principal methods of competition. ,
• Legal Proceedings, which is usually located at the end of Business, discloses the significant litigation involving the company.
Read more here.
