Code User Group Blog (UK and US): IPOs

This months user group focused on IPOs. We have seen in the last few months, increased speculation about forthcoming IPOs and hopes that the IPO market turns around following a few years of minimal activity.

We initially discussed how business owners, in our view, are the primary source of major gifts, yet the nature of company ownership is very illiquid.

Whilst owners will continue to receive dividends/salaries (if they are also an executive director), the main way in which this wealth is crystallised is via:

• Trade sales (i.e. to other companies operating in the same sector)

• IPO’s

• Private equity purchase

• Liquidation (where the business is closed and any remaining assets paid out)

The session then explored what an IPO is, why companies undertake an IPO and what funds are raised from an IPO (ex fees and tax!).

In the US user group we also discussed the popularity of different share classes and how this enables founders to continue to retain a controlling interest.

I presented a number of data sources and forecasts of that speculated which companies will undertake an IPO in 2024 such as Reddit.

We also noted typical fees are 5-7% of the IPO proceeds and as such there is a trickle-down effect when the IPO market is strong. Investment bankers, legal advisors and consultants all benefit from an IPO as well!

A good point was raised about how directors will also benefit from an IPO. Whilst they might not be listed a person of significant control, some will still have a small shareholding in the business.

We closed the session looking at signs a company is planning an IPO along with the key submission forms to the SEC and LSE.

Thanks,
Jon