IPO Readiness: Process & Checklist
IPO readiness
Author:
The Carta Team
| Author | Read time: | Published date: |
|---|---|---|
| --- | 10 minutes | 23 July 2025 |
Preparing for an IPO can feel like stepping into the unknown. This article covers everything you need to know before, during, and after an IPO—so you can go public with confidence.
Contents
- IPO readiness
- How does a company conduct an IPO?
- Traditional IPO
- Direct listing
- SPAC
- IPO timeline: What should a company be thinking about if it plans to go public ...
- …in three to five years?
- How does Carta help companies prepare for an IPO?
- IPO preparation guide & checklist
- Carta IPO Advisory services
- Process management
- Reporting preparation
- Transition phase
- How Carta works with Morgan Stanley
- How Carta works with Odyssey
- Post-IPO: What happens after going public?
How does a company conduct an IPO?
There are a few common ways a company can list its shares publicly: through a traditional IPO, a direct public offering, or a SPAC.
Traditional IPO
Going public via a traditional IPO means a private company sells shares of its common stock to underwriters (i.e., investment banks), who then resell the shares to institutional and retail investors on a stock exchange. The underwriters’ purchase is recorded in an underwriting agreement.
Direct listing
Going public via a direct listing (also known as a direct public offering) means that the private company lists its shares on a stock exchange but does not actually sell any of its own shares. All sales immediately following the direct listing are done by existing stockholders, without the benefit of an underwriter.
SPAC
Going public via a special purpose acquisition vehicle (SPAC) means a private company is acquired by a publicly traded shell company. A SPAC raises capital through an IPO specifically for the purpose of acquiring a private company and then has a set window to find a target, typically one to two years. The acquired company becomes publicly traded via a reverse triangular merger and receives the SPAC’s original IPO proceeds in the transaction.
Here’s a comparison of the most common ways a company could go public:
| Advantages | Disadvantages | |
|---|---|---|
| Traditional IPO | Tried-and-true approach to going public. Investment bankers can participate in all parts of the IPO process (e.g. the roadshow). The issuer can raise a targeted amount of capital. |
Issuing new shares dilutes existing shareholders. Stockholder lockups restrict sale opportunities. |
| Direct listing | The company’s stock value is based on supply and demand, with no potential for “game playing” over the stock price. Stockholders aren’t subject to a lockup, meaning they can sell their shares on listing day. No dilution for existing stockholders. |
The issuer does not raise primary capital from the shares sold by current stockholders. However, the SEC now permits issuers to raise capital alongside a direct listing. There still have not been that many direct listings, causing some uncertainty in the process. |
| SPAC | The transaction is done at a set valuation, unlike a traditional IPO. Some companies that don’t have access to the IPO market can become public through a SPAC. |
The compressed deal timeline can lead to a lack of extensive due diligence. The SPAC is under pressure to find a suitable target company, usually within 6-12 months. Possible capital shortfall: The SPAC may raise less money than expected. |
IPO timeline: What should a company be thinking about if it plans to go public ...
…in three to five years?
How much time you actually want to spend preparing
Many companies that intend to go public ultimately don’t list on a public exchange. Perhaps an enticing M&A opportunity presents itself, or macroeconomic conditions shut down the public markets, or the daunting realities of public-company compliance persuade management to take a different path.
Whatever the reason, the reality is that most private companies don’t exit via public offering, even if they initially intend to do so. When a potential IPO is still a few years away, executive teams should start laying groundwork for success without distracting from their primary duties to the company and their teams. A lot can change in three to five years, and flexibility is required.
Hiring people, particularly into the finance and legal teams, with experience taking a company public
The most important and time-consuming part of the lead-up to an IPO is the audit, followed closely by the drafting of the S-1. It is crucial to ensure that executives and underlying teams can handle their day jobs in addition to the IPO duties associated with the audit and S-1 drafting.
An IPO readiness assessment
An IPO readiness assessment is a review of the entire company through the lens of public-company compliance. It identifies gaps that will need to be addressed before the IPO. These assessments are typically done by audit and compliance firms or IPO consultants. A readiness assessment is not required to go public, but it helps jump-start the checklist of action items. Think of it like a report card—it tells executives where to focus compliance efforts in the lead-up to listing day.
For example, most venture-backed companies don’t have financial statements compliant with the Public Company Accounting Oversight Board, which is a requirement for public companies. The IPO readiness assessment will flag this and similar issues. Finance and legal teams can then start to rectify deficiencies identified in the IPO readiness assessment well before the IPO process officially kicks off.
Getting your financial statements ready for an audit
Most companies have experienced a diligence review of their books and records by investors during fundraising. However, this pales in comparison to the diligence review that will be done by auditors ahead of an IPO. The auditors will ask hundreds of questions, review thousands of documents, and leave no stone unturned. While it’s not practical or efficient to try and undertake this ahead of the auditors, executives can speed up the diligence process by building an understanding of the hows and whys of their financial statements.
IPO timeline: What should a company be thinking about if it plans to go public ...
...in 18-24 months?
Increasing the cadence of your 409A valuations
Late-stage private companies (LSPs) preparing for an IPO will need to receive more frequent 409A valuations and ASC 718 expense accounting reports in the ramp-up to listing day. Those valuations need to be “ audit-ready.” This means they must be conducted by an independent valuations provider able to handle increased scrutiny from both the firms auditing the company’s financial statements and the SEC.
Engaging software and service providers
External legal counsel: While certainly not required, some companies hire a new law firm as they gear up for a public offering to leverage experience and expertise in the public sector that wasn’t applicable as a private company. In the lead-up to IPO, an external legal counsel may conduct full diligence and audit the company’s cap table and records, so continuity in historical knowledge and record keeping is important.
Auditor: A company’s financial statements must be audited to the satisfaction of the SEC prior to listing day, making auditor selection crucial. Auditors have specific independence obligations that may disqualify some firms from working with certain companies, so start the selection process as soon as the company decides to pursue a public offering. The audit typically drives the entire pre-IPO timeline. Switching auditors at any point in the pre-IPO process may significantly delay the timeline to listing, as new auditors will want to re-audit financial statements and not rely on work done by the previous audit firm.
Public equity administration software: Companies will engage a public stock or equity plan administrator to track and manage employee equity, vesting schedules, settlements, and taxes. This third-party provider works with the company’s law firm, HR team, and transfer agent to customize stock plan features, communicate with employees, and ensure compliance across jurisdictions. Morgan Stanley at Work is Carta’s chosen public equity management platform.
Transfer agent: Transfer agents maintain the company’s securities records and act as a liaison between the company and the stockholders. They handle reporting and record-keeping for all non-employee equity and coordinate with any third-party administrators of employee equity plans. Companies can technically act as their own transfer agent, but that is not advisable for public companies given the scope and importance of the role and the liability associated with incorrectly maintained records. Carta acts as the official transfer agent for private companies that use Carta’s cap table software, but companies that conduct an IPO will need to move to a transfer agent specifically for public companies—such as our chosen provider, Odyssey.
Underwriters: Companies that conduct a traditional IPO require investment banks to underwrite the offering. These banks buy the stock a company is offering and then resell it to retail investors on the public exchange where your company is listed. Typically, multiple banks underwrite the offering, but one bank—known as the “lead left”—drives the process and negotiates for all other underwriters.
Composition of your board of directors
The composition of a company’s board of directors will likely change at the time of its IPO for a few reasons:
- Some existing directors will resign because they don’t want the visibility and scrutiny of being a public company board director.
- Companies may need to add new directors in order to comply with board diversity requirements maintained by Nasdaq and certain institutional investors.
- The SEC and exchanges may require public companies to establish audit, compensation, and nominating/corporate governance board committees, necessitating the addition of new directors with applicable expertise.
Identifying, interviewing, selecting, and negotiating with potential new board members is an important process, akin to hiring a new executive team member. This is often time-consuming, so many companies begin shortly after starting the IPO process.
How does Carta help companies prepare for an IPO?
In certain circumstances, it might make sense for companies to transition to a public equity management platform before an IPO. However, we encourage our customers to stay with Carta until the day they list, for a few reasons:
- Company executives and advisors are already familiar with Carta, making it easy to pull reports and documentation for the audit and effectuate pre-IPO equity conversions and splits.
- Most platforms offering both private and public cap table solutions operate those solutions separately. This means that if a company offboards from Carta while still private, it will need to onboard to the private version of another platform. Then, when the company prepares to go public, it must offboard again and transition to the public version of the provider’s platform. This unnecessary movement of important data can create data integrity issues and require significant time and effort from the legal and finance teams.
- Carta has transitioned companies to every major transfer agent in the public sector, enabling cooperation with whichever public transfer agent a company selects to ensure everything is in place for listing day. We can also refer customers preparing for an IPO to Odyssey, Carta’s exclusive partner for public company transfer agent services.
- It’s common for listing timelines to be pushed out, or for companies planning to conduct an IPO to either change their minds during the process or to exit via other means entirely. Staying on Carta until listing day minimizes disruption for employees, reduces operational burden on the finance and legal teams, and allows flexibility if plans change.
- Carta's private market liquidity solutions provide great optionality for management teams. These tools can help reduce the pressure for liquidity driving an IPO, empowering management to list at the ideal time for the business.
IPO preparation guide & checklist
We’ve put together a comprehensive guide to demystify the IPO process, including a 6-month checklist to ensure your company is making all necessary preparations so you can go public with confidence.
The guide covers all the details:
- Working with law firms, auditors, IPO advisors, transfer agents, and other third parties
- Downloading essential records and reports
- Creating accounts and moving shares ahead of listing day
- Managing stakeholder notifications
- How Carta works with Morgan Stanley to help companies transition from private to public
Carta IPO Advisory services
For customers actively pursuing a public listing within 18 to 24 months, Carta offers an IPO Advisory service to streamline the transition from private to public. Our Advisory team functions as a dedicated transition manager to support your company, legal teams, and other service providers with everything listed in the IPO readiness checklist, plus a menu of other options.
Process management
Our IPO Advisory team can help you evaluate public company transfer agents and equity plan administrators to find the best fit. Morgan Stanley at Work is Carta's preferred U.S. public equity management platform, and Odyssey Trust Company is Carta’s preferred North American transfer agent for companies going public.
Regardless of which service providers you choose, our team will coordinate with your new transfer agent and equity plan administrator to provide any relevant data or files from the Carta platform. We’ll also assist in communicating with key stakeholders and providing educational resources leading up to listing day. Through the Carta communication center, you can manage stakeholder outreach and remind stockholders to accept their securities and update demographic data.
Reporting preparation
Carta IPO Advisory can help prepare late-stage private companies for the reporting rigors of life as a public company in several ways, including:
- Managing the completion of cap table health checks to ensure clean data when transitioning to new service providers
- Reflecting pre-listing stock splits and share conversions
- Identifying insiders and pulling templated reports to assist the legal team in completing applicable disclosures in the S-1
- Providing access to a sandbox environment for audit teams
- Providing record-keeping access to a company’s Carta account for six months following its IPO
For more information about IPO Advisory services, please contact ipo-advisory@carta.com.
Transition phase
How Carta works with Morgan Stanley
Carta is collaborating with Morgan Stanley to allow companies to benefit from best-in-class private equity management on Carta before transitioning to Morgan Stanley at Work, a leading public equity management platform.
Our integrated IPO solution ensures a smoother transition for companies and their employees, providing access to expert guidance, data cleanup and migration support, customized shareholder communication plans, and more.
How Carta works with Odyssey
Private companies using Carta to manage their cap tables will have a clear pathway to IPO with a frictionless transition to Odyssey’s full-service public transfer agent and trust services, as well as shareholder support.
By integrating best-in-class technology with trusted services, this partnership between Carta and Odyssey ensures regulatory compliance, business continuity, and a smooth entry into the public markets.
Post-IPO: What happens after going public?
Any companies still using Carta leading up to their IPO will need to be offboarded on or before listing day. Our team will guide customers through the offboarding process and complete their transition to Morgan Stanley’s industry-leading public equity management platform (or the customer’s preferred provider).
Note that public companies are subject to regular reporting requirements with the SEC, including annual reports, quarterly reports, and ad hoc reporting for material events. Part of the IPO process includes applying for access to EDGAR, the SEC’s company filings tool. Your external law firm will play a major role in drafting these ongoing reports.
EDGAR is typically accessed through filing agents or “printers” who assist companies in preparing, filing, and printing (as needed) EDGAR filings. For familiarity with EDGAR and accessing public company disclosures and reports, see the SEC’s FAQs and quick tutorial.
Get hands-on support before, during, and after your IPO.
Streamline your transition from private to public with Carta, Morgan Stanley at Work, Odyssey, and the New York Stock Exchange.