If artificial intelligence (AI) could take a years-long process or task and reduce it to mere weeks or days, it would be irresponsible not to explore the possibilities. The IPO process, in which companies list their shares on a public stock exchange, is one area that is particularly ripe for a round of innovation or streamlining—and newly emerging AI tools may just be what IPO-minded startups have been waiting for.
Initial public offerings are notoriously long, complicated, and fraught with challenges. There are dozens of people involved at many stages, and even in a best-case scenario, a company hoping to list its shares on a major stock exchange is staring down a daunting gauntlet of red tape, back-and-forth with regulators, and peacocking for investors. It’s one of the reasons that SPAC transactions became a popular method for sidestepping the process a couple of years ago, and why, over the past year or so, some companies have put their IPO plans on ice.
“Let’s say a company is very prepared and has all its ducks in a row, then it’s maybe a three-month process to go through the regulators and go from private to public company status,” says Megan Penick, a partner and public securities chair at the law firm Michelman & Robinson’s New York office, who has extensive experience guiding companies through the IPO process. “But because there’s a lot involved and companies don’t usually know what they’re doing, there are a lot of things to corral, get together and organize,” she says. “Depending on the complexity of the company, it can take six months to a year.”
AI in the IPO process: Speed and efficiency
Penick explains that companies looking to go public need to do a whole lot of legwork, which includes getting their financial statements and paperwork in order, having that paperwork audited, meeting with underwriters, preparing even more statements, looking at the possibility of additional fundraising, and working with the Securities and Exchange Commission (SEC) and a stock exchange it hopes to list with, which also requires document preparation. All told, it can require hundreds or thousands of hours of work, and a significant amount of manpower, even for relatively simple companies.
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