Key Takeaways

  • Form S-1 is required for U.S. companies to register securities before an IPO.
  • It provides detailed disclosures on financials, risks, management, and business plans.
  • Investors use S-1 filings to assess a company’s prospects and investment risks.
  • Filing involves multiple rounds of SEC comments and possible amendments (S-1/A).
  • Emerging Growth Companies (EGCs) have special confidential filing options.
  • Preparing an S-1 requires careful planning, team coordination, and legal/financial expertise.
  • UpCounsel connects businesses with experienced attorneys for S-1 filing support.

Form S-1: What Is It?

Form S-1 is the initial registration form for companies that plan to take their company public. It's used to register their securities with the U.S. Securities and Exchange Commission (SEC). This form is required for all securities that meet the criteria set out by the SEC before the company can list shares on the national exchange.

When business owners take a company public, they must register any securities associated with that company in order to be added to the stock exchange. Securities, or financial instruments, provide people with a form of ownership over a company. These include such things as options, bonds, notes, debentures, and warrants.

Form S-1 is what companies use to register these financial instruments with SEC. If things change after filing and S-1 form or changes are needed in response to comments back from the SEC, an amendment to the form can be made by using Form S-1/A.

Understanding S-1 Filing Requirements

An S-1 filing is more than just a form — it’s a comprehensive disclosure package that outlines the company’s business model, market opportunity, financial status, management background, and potential risks. The Securities and Exchange Commission (SEC) uses this information to ensure investors have full, fair disclosure before the company’s shares are sold to the public.

The S-1 must comply with Regulation S-K and Regulation S-X, which dictate the required disclosures and financial statement formats. Commonly disclosed items include detailed descriptions of products, competitive strengths, intellectual property, and potential legal proceedings. Additionally, the filing details risk factors, such as market competition, economic conditions, and management challenges, that could impact investor decisions.

Parts That Make up Form S-1?

There are two parts of Form S-1 that must be submitted. Part I is the prospectus. This section includes the following information:

  • Business operations
  • Use of proceeds
  • Total proceeds
  • Price per share
  • Description of management
  • Financial condition
  • Percentage of business being sold
  • Info on the underwriters

Part II includes the following:

  • Recent sales of unregistered securities
  • Financial statement schedules
  • Exhibits

Emerging Growth Company (EGC) Benefits

Thanks to the JOBS Act, Emerging Growth Companies (EGCs) — typically companies with less than $1.235 billion in annual gross revenue — benefit from certain reduced S-1 filing requirements. EGCs can:

  • Submit their S-1 filing confidentially, allowing time to address SEC comments before public release.
  • Provide only two years (instead of three) of audited financial statements.
  • Delay certain governance and accounting disclosures required of larger public companies.

This confidential filing process can make it easier for startups or smaller companies to test IPO readiness without public scrutiny.

How Investors Use Form S-1

Investors often review Form S-1 when they're looking for companies to invest in at their IPO. Form S-1 is the best way for these investors to get concrete information about the company. Information includes the percentage of the business that will be offered up to the public and financial information about the company. That's why it's so important that the information contained within Form S-1 is accurate and complete. When you offer up your company for its IPO, you want investors there ready to purchase its stock.

Key Investor Insights from an S-1 Filing

Investors closely analyze several elements within an S-1 filing, including:

  • Use of Proceeds: How the company plans to use funds raised from the IPO.
  • Management and Compensation: Executive team experience and financial incentives.
  • Dilution Risks: The effect of issuing new shares on existing ownership.
  • Financial Metrics: Revenue, growth trends, profitability, and liquidity ratios.
  • Business Strategy: Plans for expansion, innovation, or acquisitions.

Investors also look at comparable public companies and industry benchmarks to evaluate if the offering is priced attractively. A well-prepared S-1 can increase market confidence, while weak or vague disclosures can lead to skepticism or reduced demand.

How to File Form S-1

To file Form S-1:

  1. Go onto the SEC website and use EDGAR. This is the Electronic Data Gathering, Analysis, and Retrieval system. Companies use it to file forms that are required by the SEC.
  2. Submit filings in plain text or HTML, though you can include a PDF as well. The PDF is considered to be an unofficial copy. The PDF copy has to have the same information, and the only difference is how the information is laid out on the page. It can also contain graphics that are not included in the HTML.
  3. Create a username with a password in order to get into the system to file. This will also be used for any amendments to Form S-1.

Steps to Prepare and Submit an S-1 Filing

Filing an S-1 typically requires a cross-functional team, including executives, finance teams, legal advisors, underwriters, and auditors. The process includes:

  1. Assembling the Team: Retain experienced legal counsel, investment bankers, and auditors.
  2. Drafting the S-1: Prepare detailed sections covering business, risk factors, use of proceeds, management, and financial data.
  3. SEC Review Process: Submit through EDGAR and engage in back-and-forth comments from the SEC.
  4. Responding to Comments: Amend the filing (using Form S-1/A) as necessary to address SEC feedback.
  5. Roadshow and Pricing: Once cleared, conduct investor presentations and finalize the offering price.

The preparation phase can take several months, and companies should ensure accuracy and consistency across all disclosures to avoid delays.

Resources

Form S-1

Common Challenges and Considerations

Companies preparing an S-1 filing often face challenges such as:

  • Data Accuracy: Ensuring historical financials and projections are accurate and audit-ready.
  • Legal Risks: Addressing any pending litigation or regulatory concerns transparently.
  • Market Timing: Aligning the filing and IPO with favorable market conditions.
  • Resource Demands: Managing the intensive time and resource demands on leadership and internal teams.

Working with seasoned legal and financial advisors can help mitigate these challenges and streamline the IPO process. Companies seeking expert legal assistance can turn to UpCounsel’s network of experienced securities attorneys to guide them through the S-1 filing and IPO journey.

Frequently Asked Questions

  1. What is the purpose of an S-1 filing?
    An S-1 filing registers a company’s securities with the SEC, providing essential disclosures to protect investors and prepare for a public offering.
  2. How long does the S-1 filing process take?
    The process can take several months, including preparing the form, undergoing SEC review, responding to comments, and finalizing the offering.
  3. Who can use a confidential S-1 filing?
    Emerging Growth Companies (EGCs) with less than $1.235 billion in annual revenue can submit S-1 filings confidentially under the JOBS Act.
  4. What are the main sections of the S-1 filing?
    Key sections include business description, risk factors, use of proceeds, management background, financial statements, and legal disclosures.
  5. Do companies need legal help for an S-1 filing?
    Yes, due to the complexity and regulatory requirements, companies often work with legal and financial advisors to ensure compliance and accuracy.

If you need help with the process of preparing Form S-1 or have any questions or concerns, feel free to visit UpCounsel's marketplace. Here you can post your questions or concerns in order to access UpCounsel's lawyers, who represent the top 5 percent of lawyers. These lawyers come from law schools such as Harvard and Yale. They have an average of 14 years of legal experience, including working with or on behalf of companies like Google, Menlo Ventures, and Airbnb.