Discussion on UK vs. US IPOs with Startup CFOs
At the beginning of May, I spoke at a workshop for European CFOs looking to do an IPO. There was a BDO partner who spoke on the UK IPO process, and then I layered in on top some of the accounting & reporting nuances of doing an IPO in the US.
It was a really interesting chat, as we had some candid back & forth between the BDO Partner & myself to understand where some of the differences lie between UK & US IPOs.
Here were some of the top takeaways:
1. 𝗜𝘁'𝘀 𝗲𝗮𝘀𝗶𝗲𝗿 𝗳𝗼𝗿 𝘀𝗺𝗮𝗹𝗹 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝘁𝗼 𝗹𝗶𝘀𝘁 𝗶𝗻 𝘁𝗵𝗲 𝗨𝗞: London has the AIM exchange meant for smaller companies. The US doesn't really have a similar concept, so in general, you need to have a larger market cap to think about a US IPO.
2. 𝗨𝗦 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗮𝗿𝗲 𝗺𝗼𝗿𝗲 𝗼𝗽𝗲𝗻 𝘁𝗼 𝗽𝗿𝗲-𝗿𝗲𝘃𝗲𝗻𝘂𝗲 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀: This is why a lot of biotechs list in NASDAQ, it may be more appealing to some start up tech companies as well, so long as your equity story can still compel a large enough investment
3. 𝗪𝗵𝗶𝗹𝗲 𝘁𝗵𝗲 𝗨𝗞 𝗵𝗮𝘀 𝘁𝗵𝗲 𝗙𝗖𝗔, 𝘁𝗵𝗲 𝗦𝗘𝗖 𝗽𝗿𝗼𝗰𝗲𝘀𝘀 𝗰𝗮𝗻 𝗯𝗲 𝗺𝗼𝗿𝗲 𝗶𝗻𝘁𝗶𝗺𝗶𝗱𝗮𝘁𝗶𝗻𝗴: your offering document will have to go through review with either of the regulators in your IPO, however the SEC is definitely seen as a more menacing force. Companies will want to allocate a longer IPO timeline to getting through rounds of their comments to get disclosures up-to-par. There is a better business case here for bringing in an independent IPO advisor to make sure your disclosures are best practice, and hopefully keep the comments to a minimum.
4. 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗰𝗼𝗻𝘁𝗿𝗼𝗹𝘀 𝗻𝗲𝗲𝗱 𝘁𝗼 𝗯𝗲 𝗮𝗱𝗱𝗿𝗲𝘀𝘀𝗲𝗱, 𝗻𝗼 𝗺𝗮𝘁𝘁𝗲𝗿 𝘄𝗵𝗲𝗿𝗲 𝘆𝗼𝘂 𝗴𝗼: Sure SOX is seen as a 4 (ehrm 3)-letter-word around US IPOs, but the UK also addresses controls by way of other reporting requirements during IPO, such as having ICFR stood up to support the FPPP report that a UK reporting accountant writes.
5. 𝗚𝗲𝘁 𝗿𝗲𝗮𝗱𝘆 𝗳𝗼𝗿 𝘁𝗵𝗮𝘁 𝗚𝗔𝗔𝗣 𝗰𝗼𝗻𝘃𝗲𝗿𝘀𝗶𝗼𝗻: A lot of UK private companies are still using UK GAAP. You will likely need IFRS for a UK listing. And if you'll meet the requirements for an FPI in the US, you'd get to use IFRS there as well!
Do you have any specific questions on these differences? Happy to dive in further in a follow-up post!