1. Introduction
The United States (“U.S.”) is the deepest and most active equity capital market in the world. Its principal stock exchanges, the New York Stock Exchange (“NYSE”) and the Nasdaq Stock Market (“Nasdaq”), are the two largest stock exchanges in the world by market capitalisation, and, as of March 31, 2025, were each four times larger than their nearest listing venue rival. The U.S. market serves as an attractive and important market for U.S. companies from a variety of industries and in various stages of development. It also has significant pull as a market and listing venue for many non-U.S. companies (so-called “Foreign Private Issuers” or “FPIs”) eager to access and participate in such a vibrant market.
Accessing the U.S. equity markets is motivated by many reasons for both U.S. companies and FPIs. The market offers an opportunity for companies to avail themselves of meaningful pools of capital to drive growth, reduce debt levels or for deployment to meet other business plan goals, as well as to permit investors and shareholders to monetise investments. Public market listings in the U.S. can further provide an opportunity to improve valuations by facilitating greater liquidity, augment corporate governance standards, provide more attractive structures for executive and employee compensation programmes, increase broader awareness of the company through both expanded publicity and public disclosure and research analyst coverage.
This chapter provides a broad overview of the initial public offering (“IPO”) process in the U.S. It covers the U.S. legal and regulatory framework, the listing requirements, the laws and rules that govern life as a public company, as well as brief analysis of recent market trends and a look at the near-term prospects of the U.S. IPO market. By its nature, this chapter is a summary and, accordingly, certain details and specifics were required to be omitted.
2. U.S. market performance and outlook
In line with global market trends, the U.S. public equity markets have experienced extreme highs and lows over the last five years. In the peak COVID period, the U.S. IPO market hosted over 1,000 transactions in 2021. This extraordinary market activity resulted in over $280 billion in aggregate proceeds and marked a near-doubling of the IPO market compared to 2020 and the single most active market since 2000. The 2021 flurry was in part driven by the special-purpose acquisition company (“SPAC”) boom that was peaking at that time, and which accounted for over 600 IPOs. Positive sentiment and market momentum also carried the highest number of traditional (non-SPAC) IPOs since 2000.
The year 2022 witnessed a steep decline from the highs of the 2021 market. With material increases in inflation and interest rates, as well as a meaningful uptick in volatility in no small part resulting from Russia's invasion of Ukraine in February of that year, the U.S. IPO market, in tandem with global markets, went into reverse. The number of IPOs in the U.S. in 2022 decreased to 175, marking the fewest IPOs in the U.S. in the 21st century. In addition to a collapse in the SPAC market, broader investor sentiment dissipated, leaving very little appetite for the IPO product.
Following the low of 2022, the years that followed saw only incremental improvement in the U.S. IPO market, with 2023 and 2024 recording 149 and 217 IPOs, respectively. While finance, biotech, pharma and consumers dominated the sectors represented in the IPOs during these years, almost all major industry verticals saw some market activity.
With a change in U.S. presidential administrations in 2025 and its shift in economic, trade and fiscal policy, as well as the global reaction to these changes, significant uncertainty has been introduced into the global economy, which has resulted in meaningful volatility in global equity markets, including the U.S. market, in the first half of the year. While U.S. equity markets have experienced periods of supportive market conditions between bouts of volatility, the lack of visibility on available market windows into which companies and selling shareholders can launch IPOs makes it difficult to anticipate how the year will play out in full. Through May 2025, there have been 137 IPOs in the U.S. representing 10 industry verticals. While the year has commenced with some cautious optimism, forces beyond mere markets will likely dictate the year's overall outcome.
The next few sections provide a summary overview of the various steps involved in a U.S. IPO process along with an outline of the key obligations and possible liabilities that companies looking to list in the U.S. should be aware of.
3. The IPO process: Steps, documentation, timing, parties and market practice
Unless made pursuant to an exemption from registration under the Securities Act of 1933 (“Securities Act”), all offers and sales of securities must be registered with the U.S. Securities and Exchange Commission (“SEC”) by filing a registration statement. Domestic issuers use Form S-1 and FPIs use Form F-1 for an IPO of their securities. In an IPO, primary offerings and secondary offerings can occur concurrently. A primary offering consists of a company selling its own shares and a secondary offering involves the sale of existing shares by current shareholders.
The drafting, review and revision of the registration statement is only one component of the IPO process. A company must also spend significant time preparing for life as a public company after the IPO closes. Companies will typically spend several months considering whether they are a good candidate for public company status. During this time, a company should evaluate whether any changes to its corporate governance structure are needed, whether its accounting controls and procedures are sufficient and whether it is prepared to comply with the SEC's reporting requirements. Key aspects of the “corporate housekeeping” period include (i) evaluation of the company's debt and equity capital mix and desired capital structure, (ii) reorganisation of the board of directors and board committees, (iii) implementation of corporate governance policies (such as codes of ethics, insider trading policies, whistleblower policies and communications guidelines), (iv) evaluation of executive compensation arrangements, and (v) review of existing contractual obligations, among other things.
While the official “start” of the IPO process is considered to be the initial organisational meeting, a significant amount of preparation occurs before this meeting. Assembly of the IPO working group (which will consist of legal counsel, independent auditors, and the lead underwriter, among others) occurs in the months leading up to the organisation meeting. Companies will often also engage IPO advisors, transfer agents and registrars, financial printers and additional underwriters during the course of the IPO process. Underwriters' counsel is appointed directly by the underwriters, but the company will typically provide input on the selection of underwriters' counsel.
When selecting the lead underwriter (“lead left”), a company will typically consider its existing relationships with investment banking firms and the experience and expertise that each firm can provide. The lead left will spearhead the prospectus drafting, due diligence and marketing processes and will work closely with the core underwriting group, known as the lead bookrunners. Later on in the process, the underwriting syndicate will often expand to include co-managers, who play a less active role in the IPO preparation process. Underwriting syndicates must also comply with applicable research “blackout” periods during which they are not permitted to publish research on the company. The underwriters' compensation will be evidenced through an underwriting agreement, which is discussed later in this chapter.
Any company considering going public will also have to determine whether it will stick with its current auditor or change auditors. While an existing auditor will have more familiarity with the company's current internal controls, reporting procedures and financial statements, the existing auditor may not have the requisite experience to meet the SEC's standards and the reporting demands of a public company. The auditor for a registered company must meet the independence standards set by the Public Company Accounting Oversight Board (“PCAOB”) and the SEC, and its audits must be conducted in compliance with PCAOB standards. If a company decides to switch to a larger audit firm with more IPO and public company reporting experience, this should be done as early as possible in the IPO planning process. Once the IPO auditor is confirmed, the auditor will begin auditing the company's financial statements and assist in the preparation of the Management's Discussion and Analysis (“MD&A”) section of the registration statement.
During the initial preparation phase, the underwriters will conduct a due diligence process. The due diligence process consists of review of the company's material contracts, intellectual property, corporate governance structure and litigation/compliance history, among other things. This is an important process both for the protection of transaction participants and to help the underwriters better understand the company in order to assist them in the marketing and investor outreach processes.
The working group will simultaneously work on drafting and revising the registration statement, which includes the prospectus, the main marketing document relied on by investors. The primary sections included in the prospectus include the business overview, risk factors, use of proceeds, executive compensation overview and analysis of the company's financial statements.
Once a draft of the registration statement is substantially complete, if eligible, companies will typically submit a confidential draft of their registration statement to the SEC. Such confidential submission must include two to three years of audited financials and certain required disclosures. While waiting for the SEC to provide comments, the working group should work on progressing other deliverables (such as the comfort letter, listing applications and legal opinions). Approximately 30 days after the initial submission, the SEC will provide a comment letter, which includes comments typically focused on incomplete disclosures, risk factors, conflicts of interest and Generally Accepted Accounting Principle (“GAAP”) compliance or the use of non-GAAP measures. The company will collaborate with the working group to prepare a written formal response to the SEC and amend the registration statement for subsequent submissions. This is an iterative process, and the company and the SEC may exchange a few rounds of comments prior to SEC clearance.
The Securities Act restricts companies from marketing their securities prior to the filing of the registration statement to prevent “conditioning the market”, and companies must enforce strict publicity guidelines to ensure that no communications (including press releases, social media and internal employee communications) constitute an “offer to sell” under Section 5(c). Confidential submissions are not deemed official filings.
During the pre-filing period, eligible companies may engage in “testing-the-waters” (“TTW”) communications solely with qualified institutional buyers and institutional accredited investors. TTW meetings are aimed at gauging public interest in the offering and lowering execution risk, but no solicitations or commitments may be made during this time. Companies may also rely on limited safe harbours for communications during the pre-filing period, such as Rule 135 (basic offering announcements), Rule 163A (communications made over 30 days before filing) and Rule 169 (standard factual business disclosures).
Once the SEC confirms that all material comments have been addressed and clears the registration statement for filing, the company is permitted to file the registration statement, which is typically done at least 15 days prior to the commencement of the roadshow (except for FPIs that are already listed on a non-U.S. securities exchange). During the waiting period in between the filing and effectiveness of the registration statement, companies will typically publish a Rule 134 press release containing limited information about the IPO and circulate a preliminary prospectus (known as a “red herring”), which includes a “bona fide estimate” of the price range for the IPO shares. The underwriters will use the prospectus supplement to commence the roadshow or “book-building” process.
The roadshow period typically lasts four to 10 business days and once the company and underwriters agree on the final IPO price and number of shares, the company will request that the SEC declare the registration statement “effective” (unless effectiveness is automatic). Shortly after the registration statement is declared effective, the underwriting agreement will be executed, and the pricing press release will be published. The underwriting agreement memorialises the underwriters' commitment to purchase the IPO shares and contains company representations and warranties, covenants (including lock-up agreements whereby certain directors, officers and shareholders agree to not sell their shares for a prescribed period after pricing), closing conditions and indemnification provisions. The company will also file (i) a final prospectus, which includes the final offering price, and (ii) a Form 8-A registration statement, which registers the company's common stock under the Securities Exchange Act of 1934 (“Exchange Act”).
In accordance with the SEC's most recent amendment to Rule 15c6-1 under the Exchange Act (which became effective on May 28, 2024), IPO closings must typically occur one business day after pricing. On the closing date, the underwriters will pay the offering proceeds (minus underwriting discounts, commissions and expenses) to the company (or selling shareholders) in exchange for the company or selling shareholder shares. The shares are delivered to investors through the Depository Trust Company. On the closing date, the auditors will deliver their “comfort letter” attesting their independence and review of the company's financial condition and the financial statements included in the registration statement. Other closing deliverables (such as legal opinions, negative assurance letters and officer/secretary certificates) will be delivered to the appropriate recipients, as designated in the underwriting agreement.
4. Key rules and regulators
IPOs in the U.S. are primarily governed by the Securities Act and the Exchange Act, the former focusing on the registration of new securities and the latter on secondary market trading. In addition to the statutes themselves, the SEC promulgates rules and regulations that impose further obligations on registrants. Registrants will also step into an additional obligation, e.g., the Sarbanes-Oxley Act (“SOX”), when they become public. Finally, U.S. IPOs are indirectly exposed to further regulatory burden in the form of regulations on intermediaries, including auditors, underwriters, and stock exchanges.
The SEC, frequently referred to as the Commission, serves as the primary regulator in a U.S. IPO. Formed in response to the stock market crashes that precipitated the Great Depression, the SEC carries a three-fold mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The SEC is separated into various divisions, with an aspiring public company primarily corresponding with the Division of Corporate Finance, which reviews and comments on registration statements filed by potential public companies. While the SEC serves as the U.S.'s primary securities regulator, depending on the nature of the company's business, other regulators, both state and federal, may have to be involved the IPO process.
In addition to direct regulation of registrants, the U.S. imposes additional obligations on IPO participants through regulations on intermediaries. Public company accountants must be registered with the PCAOB. Established by SOX, the PCAOB sets independence obligations and audit standards for public company auditors. Additionally, the underwriters hired by a potential public company are subject to regulation by the Financial Industry Regulatory Authority (“FINRA”), a self-regulatory organisation (“SRO”), regulating broker-dealers in IPOs with a U.S. nexus. FINRA participation in an IPO starts 180 days before the first confidential submission and remains in effect until 60 days until after the effectiveness date of the offering. Following registration (or confidential submission) to the SEC, registrants must within three business days file certain information with FINRA for review; filers must also pay a filing fee to FINRA. The filing is minimally burdensome for registrants, with FINRA accepting the EDGAR accession number in lieu of a separate filing. FINRA reviews underwriter compensation to ensure that it is not “unfair or unreasonable”. Generally, FINRA must deliver a “no objections” letter before the SEC can declare an IPO registration statement effective.
Potential registrants are also subject to review by another set of SROs: the U.S. stock exchanges. Most registrants look to list on either the NYSE or Nasdaq. Each exchange has its own rules and listing standards that a potential public company will have to abide by. Violation of stock exchange rules can trigger SEC obligations, e.g., the requirement to file a current report on Form 8-K notifying the market of the violation, so registrants should carefully consider which exchange they would like to register on. Generally, registrants will be required to pay both an initial listing fee and an annual fee for the privilege of being listed on the exchange, with the listing processing taking between four and six weeks.
5. Public company responsibilities
There are certain key requirements that apply to U.S.-listed companies including, inter alia, requirements under the Securities Act, the Exchange Act, Dodd-Frank, SOX and other applicable exchange-specific corporate governance requirements.
Periodic and current reporting and disclosure requirements
The periodic reporting and disclosure requirements for U.S.-listed companies depend on whether such company is a domestic issuer or an FPI.
The Exchange Act requires that (i) domestic issuers file annual reports on Form 10-K and quarterly reports on Form 10-Q, and (ii) FPIs file annual reports on Form 20-F. Although FPIs are not required to file quarterly reports, some FPIs elect to voluntarily file such reports on Form 10-Q. Annual reports contain, among other things, information about the company, risk factors associated with investing in the company and a discussion and analysis by the company's management of its financial results. While the timeline for filing such annual and quarterly reports for domestic issuers varies, all FPIs must file their 20-F within four months of the end of their fiscal year.
In addition to annual and quarterly reports, a domestic issuer is required to prepare current reports relating to the disclosure of certain key events in its lifecycle, such as entering into any material agreement, appointment of directors or officers, or bankruptcy. These events must be reported on Form 8-K and must be filed with or furnished to the SEC within four business days of the event. While FPIs are not subject to the Form 8-K current reporting requirement, they must furnish or file on Form 6-K any material information that is (i) made public or is required to be made public by the home jurisdiction of the FPI, (ii) filed or is required to be filed with a stock exchange, which is made public by such exchange, and (iii) distributed or is required to be distributed to the FPI's security holders.
It is important for the company's CEO and CFO to be intimately involved in the preparation of the company's annual and quarterly financial reports due to the responsibility they must take for the disclosure. Specifically, Sections 302 and 906 of SOX require that the principal executive officer and principal financial officer of a U.S.-listed company personally certify to the accuracy and completeness of the financial reports filed with the SEC on Forms 10-K, 10-Q and 20-F. Among other things, the CEO and CFO must certify that the financial statements (and other financial information) included in the filing fairly present in all material respects the financial condition and results of operations of the company and that, based on the CEO's or CFO's knowledge, the report does not contain any untrue statement of material fact or any omission that would be necessary to make the statements in the report not misleading.
Finally, under Section 404 of SOX, most issuers must obtain auditor attestations over the management's assessment of the company's internal control over financial reporting (“ICFR”). The auditors perform their independent testing of the ICFR and review the management's assessment of the ICFR, upon which they issue their auditor attestation, which is included as part of the issuer's Form 10-K.
Shareholder engagement and ownership disclosure obligations
Once a company is publicly listed, it would generally be required to hold annual shareholder meetings. In advance of shareholder meetings, domestic issuers are required to file with the SEC proxy statements pursuant to Regulation 14A of the SEC. The proxy statement, which is in the form of Schedule 14A, provides shareholders with key information to make informed voting decisions, including details on director nominations, executive compensation (including a summary compensation table and CEO pay ratio), corporate governance practices, related-party transactions and shareholder proposals. It also includes audit-related disclosures, such as fees paid to auditors and the audit committee's role. The notice stating that the proxy statement is available electronically must be sent to the issuer's shareholders 40 days before the meeting. Notably, FPIs are exempt from the proxy rules and instead must follow the shareholder circular or similar rules and the related disclosure requirements of their home jurisdiction.
All U.S.-listed companies are required to comply with shareholder ownership disclosure rules, which are geared towards increasing transparency regarding individuals or entities holding significant or controlling interests in the company. Section 13(d) of the Exchange Act requires any person or group of persons acquiring the beneficial ownership of more than 5% of any class of the company's securities to file a Schedule 13D with the SEC within five business days of reaching such threshold. Some passive investors or certain qualified investors can be exempt from Section 13(d) but must instead file a Schedule 13G with the SEC. U.S. domestic companies are also subject to Section 16 of the Exchange Act, which mandates that any insiders of the company (officers, directors and holders of 10% of any class of the company's securities) must disclose their holdings and change in ownership on Forms 3, 4 and 5, as applicable.
Corporate governance standards
The corporate governance standards applicable to U.S.-listed companies largely depend on the exchange on which the company is listed. Nasdaq and the NYSE accounted for 98.5% of U.S. IPOs in 2024. Nasdaq and the NYSE share various key corporate governance requirements, including (i) requiring that the majority of the board be composed of independent directors, and (ii) mandating that the audit and compensation committees are entirely composed of independent directors. However, there are some key corporate governance differences between the two exchanges. For example, while the NYSE requires the board to conduct annual self-evaluations, there is no such requirement for Nasdaq. On the other hand, Nasdaq requires that directors be elected annually, which is not a requirement under the NYSE listing rules.
Under both the NYSE and Nasdaq rules, FPIs are exempt from a majority of the corporate governance obligations. The requirements that apply to FPIs mandatorily include the requirement to have an audit committee composed entirely of independent directors and the requirement to disclose in the annual report on Form 20-F how the company's corporate governance regime diverges from the otherwise generally applicable U.S. and NYSE or Nasdaq requirements.
The state of the company's incorporation also plays an important role in the corporate governance laws that apply to it. While there has been a recent shift away from Delaware, most U.S.-listed companies continue to be incorporated in Delaware, which has predictable corporate governance laws requiring directors and officers to abide by certain key fiduciary duties as agents of the shareholders.
Companies planning a U.S. listing must carefully select their preferred listing venue and state of incorporation, keeping in mind the various degrees of obligations that arise with each decision.
Key new developments
The obligations of public companies in the U.S. continue to evolve every year, with new or changing requirements emerging from time to time.
Over the last couple of years, cybersecurity disclosure has become a key disclosure-related point for the SEC. U.S.-listed public companies (including FPIs) must include mandatory cybersecurity disclosure in their annual reports (or under Part III, Item 16K of Form 20-F for FPIs). This includes disclosure on the company's internal cybersecurity policies, including their ability to manage, identify and protect against cybersecurity risks. To the extent any incident has caused a cybersecurity risk to materialise, companies must provide adequate disclosure regarding such incident. Additionally, beginning in 2025, U.S.-listed public companies are now required to file their insider trading policies as Exhibit 11 to Form 20-F. Specifically, companies are required to respond to whether they have adopted an insider trading policy “that [is] reasonably designed to promote compliance with applicable insider trading laws”.
Cybersecurity and insider trading disclosure are only two examples of the evolving public disclosure landscape in the U.S. As such, companies considering to list in the U.S. must keep tabs on the latest disclosure obligations that will be imposed upon them upon their listing.
6. Potential risks, liabilities and pitfalls
The advantages of listing in the U.S., including access to capital, liquidity and a wide investor base, must be weighed against various risks, liabilities and pitfalls that may arise as part of the various obligations imposed on publicly listed companies. This section provides an overview of some key liabilities that may arise under the Securities Act and the Exchange Act.
Section 11 of the Securities Act provides that issuers, underwriters or other transaction participants are liable for losses suffered by investors that are caused by material misstatements or omissions in the registration statement. While issuers are strictly liable under Section 11 for any such losses, other transaction participants, such as underwriters, selling shareholders and directors and officers, have the ability to prove that, after reasonable investigation, they had reasonable grounds to believe and did believe, at the time that the registration statement was approved by the SEC, that the disclosure in the registration was accurate and complete. This is generally referred to as a “due diligence defence”. As such, all parties involved in preparing the registration statement and conducting the due diligence must work together to ensure that they are including all material information into the registration statement or that there are no material facts omitted that would render the information present in the registration statement misleading.
In addition to Section 11, Section 12(a)(2) under the Securities Act creates liability for any person who offers or sells a security by means of a prospectus or an oral statement that includes a material misstatement or omission. Similar to Section 11 liability claims, a defendant in a Section 12(a)(2) action can assert a due diligence defence to prove that in the exercise of reasonable care, the defendant could not have known about the misstatement or omission that is the source of the claim.
Section 17 of the Securities Act regulates fraudulent activity in the offer or sale of securities, including obtaining money or property by means of a material misstatement or omission. While lawsuits under Sections 11 and 12(a)(2) of the Securities Act are generally filed by private plaintiffs who were impacted by the material misstatement or omission, the SEC generally enforces Section 17.
Section 10(b) and Rule 10b-5 of the Exchange Act are widely used provisions in the U.S. securities laws to protect investors against manipulative or deceptive practices in connection with the purchase or sale of securities. These provisions provide a private right of action, and lawsuits brought under these provisions are a common feature of securities law litigation. To establish their claim, plaintiffs are required to demonstrate that (i) there was a material misstatement or omission in the offering document, (ii) the defendant had an intention to deceive or a reckless disregard for the truth – referred to as scienter, (iii) the damage caused was in connection with the purchase or sale of a security, (iv) the plaintiff relied on the material misstatement or omission, (v) the plaintiff suffered economic loss, and (vi) the economic loss suffered was linked to the fraudulent activity in question. Unlike in Section 11 and Section 12 actions where defendants can defend themselves by evidencing the reasonableness of the investigation into the company and the process that was undertaken in the preparation of the registration statement, in a Section 10(b) and Rule 10b-5 action, the onus falls on the plaintiff to prove that the defendant had the requisite scienter. This creates a relatively high barrier for successful lawsuits.
Section 15 of the Securities Act and Section 20 of the Exchange Act provide a basis for plaintiffs to bring an action against “control persons” for a primary violation under Section 11 or Section 12 of the Securities Act or Section 10(b) or Rule 10b-5 of the Exchange Act. Control persons are jointly and severally liable with the controlled entity, i.e., the issuer of the securities. These defendants can include directors, officers, principal controlling shareholders or other shareholders who have power to direct management and policies of the issuer. An affirmative defence is available to control persons and requires them to show that they acted in good faith and did not induce the act or omission that gave rise to the violation in question.
In summary, companies seeking to list in the U.S. must take adequate precaution in every statement they make to investors, either oral or written, to ensure that such statement does not include an untrue statement of a material fact or any omission to state a material fact that would have been necessary to make the statements made not misleading.
Through the due diligence process, issuers, underwriters, auditors, selling shareholders and other transaction participants work together to ensure that any disclosure to investors is materially accurate and complete. A customary due diligence process involves multiple aspects, including documentary, legal and compliance, financial, business and auditor due diligence process, as well as an auditor comfort process and the back-up or verification of certain material non-financial data points included in the registration statement. Additionally, all transaction participants participate in the disclosure drafting and preparation of the registration statement and marketing materials to ensure that the disclosure accurately reflects their due diligence findings. An effective due diligence process is necessary for defendants to succeed in establishing a due diligence defence in a Section 11 or Section 12 action, and to prevent a plaintiff from establishing the scienter requirement of a Section 10(b) or Rule 10b-5 claim.
7. Conclusion
A U.S. IPO is a complex process characterised by significant law and regulation, which requires time, effort, patience and a team of capable advisors for companies and selling shareholders to reach their goals and desired outcomes. An often-cited feature of these transactions is the legal risk for transaction participants. The depth of the U.S. market and the many advantages of being a public company listed on the NYSE or Nasdaq often far outweigh the risks and potential pitfalls, making a U.S. IPO the pinnacle to which many companies, shareholders and investors aspire.
Acknowledgments
The authors would like to acknowledge the contributions of their colleagues Alyssa Julian and Harshil Bansal in the drafting of this chapter.
Originally published by Global Legal Insights.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
