How to use a Data Room for IPOs

Before a company decides to go public it only has a limited number of investors i.e. the once that were involved in the fundraising process. However, the process of going public will entail much more people involved with a large number of documents and research, all of which must be monitored. The entire process happens in five stages:

  1. Select a bank
  2. Due diligence and filings
  3. Pricing
  4. Stabilization
  5. Transition

A data room can be extremely helpful, and often simply indispensable in all of these stages. Let’s take a closer look.

Selecting the Right Bank

vdr for IPO

The process begins with the issuing company selecting a bank that will guide them throughout the IPO process and provide underwriting services. While there are many factors involved in the bank selection process, there even more communication needs to take place since all of the participants need to come to an agreement on which bank they will choose. Conducting such important communication is not suitable for email or instant message services since they are not very secure. We live in an era of corporate espionage and all sensitive information must be secured with many layers of protection.

A virtual data room will have standard features such as data encryption and two-factor authentication in auditioning to adhere to international security standards such as ISO/IEC 27001:2013 and SOC 2. All of the communication will remain secured and can be done in real-time to facilitate decision making.

Due Diligence and Filings

data room for IPOs

Anybody who has ever conducted due diligence can testify to the large volume of documents involved. You can expect a lot of documentation to keep track of with something as complex as underwriting. A virtual data room can help keep the entire process manageable and allow you to pull any piece of information at a moment’s notice. You will no longer have to waste searching for documents or requesting information to be sent to you since everything will be in one place. Furthermore, participants will have the opportunity to view the information that was collected as well as the results and ask questions and make comments on the findings.

The system will keep track of all of the questions that were asked can even create an FAQ sheet which will eliminate having to answer the same questions over and over again. Keep in mind, only the people to whom you grant permission to comment and ask questions will be able to do so.


data room for IPOs prising

After the due diligence has concluded, the issuing company and the underwriter need to decide on the offer price. There are many factors that must be considered when deciding on a price, but you might not want this information to be available to all of the participants involved. A virtual data room allows you to grant and revoke access permissions to users who are not entitled to see certain information. Furthermore, such granularity can be taken a step further. For example, let’s say that you decided to upload an Excel spreadsheet into the data room, but you do not want certain participants to see the formulas that were involved during the calculations. A virtual data room allows you to achieve such a level of granularity thus facilitating business processes and keeping information secure.

Also, if you have a document that requires more protection than some of the others, you can enable “Fence View” which serves as a physical barrier between the user and the document and the document and can guard against camera based attacks. After all, if someone really wants to get their hands on a piece of information they will go to great length to do it. This includes simply taking out their smartphone and taking a picture of the screen.


virtual data room for IPO

Now that the company has appeared on the public market, the underwriter needs to provide after-market stabilization. This is a very complicated stage with a lot of risks involved. For example, the trading price can fall below the IPO price in which case the underwriter will have to step in and buy back some shares. However, in order to account for all of the possible risks and your reaction to them it is important to have a plan written down or, at the very least, some checklist with concrete steps. You can conduct all discussion about possible risks and any course of action inside the data room. In fact, it would be better to communicate inside the data room because all of your documentation is also there and you can rely on them when you are assembling your stabilization plan.

Transitioning to Market Competition

IPO process

This process will begin 25 days after the IPO. Investors will now start to rely on market forces for information about their shares. Once the 25 day period ends, the underwriters will start providing information about the earnings and valuation of the issuing company. You will need to keep all of the documentation that was used during the previous four stages on record since they could be demanded by the SEC or investors. You can continue using the data room as a central document repository even after the project since it offers an unlimited amount of storage and all of the contents can be downloaded to flash drive or DVD if you need to.

It can be difficult to manage all of these stages without a data room since the avalanche of documents can consume the entire process. A data room will give you peace of mind knowing that all of your information is secure while expediting all of the processes involved at the same time.