IPO readiness

Author:

The Carta Team

| Read time:

10 minutes

Published date:

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
• Post-IPO: What happens after going public?

Many startup founders dream of one day ringing a stock exchange’s opening bell to announce the public listing of their company’s shares. Carta wants to help make that dream a reality. This IPO readiness guide for company executives and their legal and financial counsel aims to demystify the terminology, strategy, and processes involved in transitioning from the private markets to the public markets.

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:

IPO timeline: What should a company be thinking about if it plans to go public ...

…in three to five years?

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 will be critical to ensure that executives and underlying teams are in place that 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’s meant to identify 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 in order 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.

Getting your financial statements ready for an audit

Most companies have experienced a diligence review of their books and records by investors during fundraising. But that 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.

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 and be 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, so auditor selection is crucial. Auditors have certain independence obligations that may disqualify some firms from working with certain companies, so it's important to start the selection process right after 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, because the new auditors will want to re-audit financial statements and not rely on work done by the prior 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.
• 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 work 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 the Carta 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 that a company is offering and then resell it to retail investors on the public exchange on which your company is listed. There are typically multiple banks underwriting the offering, but one bank—known as the “lead left”—typically drives the process and negotiates for all of the 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 director on the board of a public company.
• Companies may need to add new directors in order to comply with requirements for board diversity 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, and companies may need to add new directors with applicable expertise.

Identifying, interviewing, selecting, and negotiating with potential new board members is an important process, akin to hiring a new member of the executive team. As such, it typically is a time-consuming process, one that many companies begin shortly after kicking off 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:

1. Company executives and advisors are already familiar with Carta, which makes it easy to pull reports and documentation for the audit and effectuate pre-IPO equity conversions and splits.
2. Most platforms that offer 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 actually prepares to go public, it will need to 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.
3. Carta has transitioned companies to every major transfer agent in the public sector, so we can seamlessly work with whichever public transfer agent a company selects to make sure everything is where it needs to be on listing day. We can also refer customers preparing for an IPO to Odyssey, Carta’s exclusive partner for public company transfer agent services.
4. It’s common for listing timelines to be pushed out, or for companies that plan to conduct an IPO to either change their minds during the process or to exit via other means entirely. Staying on Carta until the listing day minimizes disruption for employees, reduces operational burden on the finance and legal teams, and allows flexibility if plans change.
5. Carta's private market liquidity solutions provide great optionality for management teams. These tools can help reduce the pressure for liquidity that often drives 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 the 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 that are 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 above 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.

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 help the legal team complete 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, allowing 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.

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.

Post-IPO: What happens after going public?

Any companies still using Carta in the lead up to their IPO will need to be offboarded on or before listing day. Our team will guide customers through the offboarding process and finalize 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 will include applying for access to EDGAR, the SEC’s company filings tool. Your external law firm will have a major role in the drafting of these ongoing reports.

EDGAR is typically accessed through filing agents or “printers” who help companies prepare, file, and print (as needed) EDGAR filings. If you’d like to get familiar with EDGAR and see how to access public company disclosures and reports, check out the SEC’s FAQs and quick tutorial.