Bringing your company’s initial public offering (IPO) to the market is an exciting day. It typically means your business is a genuine success and the masses are interested in buying into it. How do you know if you are ready to take your company public? The very first step is to see if you meet the requirements set by each market exchange.
The two largest stock exchanges are the New York Stock Exchange (NYSE) and the NASDAQ Global Select Market. Each of these is regulated by the Securities and Exchange Commission which requires any company to have at least three years of audited financial statements before registering to go public. If your company does not have those records, it is possible to create some after the fact as long as there is sufficient data for auditors to review.
Once you have three years’ worth of audited records, you have to meet the earnings requirements for the exchange with which you want to list. The NYSE requires a total of $10 million in pre-tax earnings from the past three years with a minimum of $2 million in each of the past two years. The NASDAQ Global Select expects companies to have a minimum of $11 million total over the previous three years with at least $2.2 million apiece in the past two years.
If your company cannot meet those qualifications, you may still be able to list your IPO if you can meet the exchanges’ alternative standards pertaining to cash flow, revenue and market cap.
If the NYSE and NASDAQ still are not a possibility for your business, you may consider listing with one of their lesser markets. The NYSE has the American Stock Exchange (AMEX) which only requires $750,000 of pre-tax income in either the latest fiscal year or in two of the three most recent years. And the NASDAQ Global Market requires just $1 million in pre-tax income during the same time frame.
Once your company has met the qualifications, you can continue the steps to your initial public offering and the rewards of going public.