Form S-1

Form S-1 is a required SEC document for IPOs, providing detailed company information to potential investors

Author: Emily Rustom
Emily Rustom
Emily Rustom
I'm a BBA Finance and Economics student at Texas A&M university from Houston, Texas. On campus, I’m involved in Delta Gamma Sorority, Aggies on Wall Street, Aggie Women in Business, Horizons Finance, and Aggie Investment club on top of my job as a Fashion Marketing Coordinator. Outside of university, I've had experiences participating in the PJT Partners cohort program, WSO internship, UTIMCO Scholars program, and a Financial Officer of Grace in His hands NonProfit. These programs allowed me to develop skills in Excel, time management, organization, PowerPoint, and enhance my industry knowledge. Reach out on my Linkedin or email for more information!
Reviewed By: Kevin Henderson
Kevin Henderson
Kevin Henderson
Private Equity | Corporate Finance

Kevin is currently the Head of Execution and a Vice President at Ion Pacific, a merchant bank and asset manager based Hong Kong that invests in the technology sector globally. Prior to joining Ion Pacific, Kevin was a Vice President at Accordion Partners, a consulting firm that works with management teams at portfolio companies of leading private equity firms.

Previously, he was an Associate in the Power, Energy, and Infrastructure Investment Banking group at Lazard in New York where he completed numerous M&A transactions and advised corporate clients on a range of financial and strategic issues. Kevin began his career in corporate finance roles at Enbridge Inc. in Canada. During his time at Enbridge Kevin worked across the finance function gaining experience in treasury, corporate planning, and investor relations.

Kevin holds an MBA from Harvard Business School, a Bachelor of Commerce Degree from Queen's University and is a CFA Charterholder.

Last Updated:September 23, 2023

What is SEC Form S-1?

The SEC Form S-1 is a required registration form that domestic companies must file with the Securities and Exchange Committee (SEC) when they plan on going public and offering securities for the first time on public exchanges such as New York Stock Exchange (NYSE), NASDAQ, and American Stock Exchange (AMEX).

Since the SEC guidelines require that this form must be correctly completed before a company’s shares can be exchanged, companies typically file the document when preparing for their initial public offering (IPO).

The form contains an OMB approval number of 3234-0065, and the online form is only eight pages long.

Securities Act Section 5 made it essential for the issuer to file a registration statement. This applies to all public companies excluding any private placements.

The registration is held responsible and liable for any misconstrues of the form. The format and disclosed rules must be followed and are detailed in Section 5. 

Key Takeaways

  • Form S-1 is a mandatory SEC filing for domestic companies planning to go public, offering securities for the first time on exchanges like NYSE, NASDAQ, or AMEX.

  • Form S-1 contains detailed financial material, history, risk factors, and more, helping investors make informed decisions before a company's IPO.

  • The form consists of a prospectus, covering key aspects like earnings, proceeds, offering price, dilution, distribution, securities description, and expert interests.

  • Accurate and comprehensive disclosure is vital, as omitted or misrepresented information may lead to security fraud penalties under Securities Act Section 11, 12(a)(2).

  • Companies may file amendments (Form S-1/A) for updates, which investors use to evaluate performance and financial data before an IPO.

What kind of information can I find on form S1?

According to section 5 of the Securities Act of 1933, also referred to as the Truth in Securities law, the information on a form S1 must include all detailed financial material of the company, such as the history, financial statements, risk factors, and other information deemed relevant. 

The document's content is split into two parts: the prospectus and the supplemental information, which is not required. 

1. The prospectus is a formal written document containing the following:   

  • Forepart of the Registration Statement and Outside Front Cover Page of Prospectus
  • Inside Front and Outside Back Cover Pages of Prospectus
  • Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges
  • Use of Proceeds
  • Determination of Offering Price
  • Dilution
  • Selling Security Holders
  • Plan of Distribution
  • Description of Securities to be Registered
  • Interests of Named Experts and Counsel
  • Material Changes
  • Incorporation of Certain Information by Reference

2. Although not a legal requirement, Part II generally contains 

  • Recent sales of unregistered securities
  • Exhibits
  • Other Expenses of Issuance and Distribution
  • Indemnification of Directors and Officers
  • Recent Sales of Unregistered Securities

It is pivotal to note that under section 11, 12(a)(2) of the Securities Act, an issuer could be penalized and held liable for security fraud if any important information is omitted or misrepresented. 

NOTE

The SEC requires the disclosure of any business dealings between the company, its directors, and outside counsel.

What is a Form S-1/A?

Information on form S1 may need to be amended; when this is the case, companies will need to file a Form S-1/A. This could cause a company's IPO delay and should be considered when beginning the filing process. 

Note that a company can amend its form as often as it takes. However, each amendment could take up to four weeks. This could dampen IPO plans, which is why a company must uphold the SEC guidelines.

The Securities Exchange Act of 1933, also referred to as the Truth in Securities law, requires these updated forms to be filed to disclose important information upon registering a company's securities.

Reasons why a company might need to file this form:

  • ‘Material’ Changes
  • General market conditions
  • SEC comments
  • Lawsuits

This particular form can also be referred to as Regulation A Offering Statement and is critical in upholding the SEC provisions of

  1. Requiring that investors receive financial and other significant information concerning securities being offered for public sale.
  2. Prohibit deceit, misrepresentations, and other fraud in the sale of securities.

That being said, many investors refer to the initial and amendment filing when evaluating a company's performance. This is because the S-1/a gives a company the most up-to-date financial information before its IPO.

Why is form S-1 important?

This form is important because it is a gateway to disclose information to the SEC. The information contained in Form S1 is then used to determine whether the company fits the criteria to be able to go public and offer its securities. 

The SEC can monitor how well the company complies with federal securities laws and regulations with the information provided. This document is crucial for regulatory purposes and significant in potential investors' decisions on whether they would like to invest in the company's stock. 

Individuals who want to learn more about an upcoming IPO can refer to, report, and evaluate the financial material before the shares are available.

Form S-1 is essential for investors because it provides them with fundamental information about a company. Since the SEC reviews and verifies the information in this document, investors can trust that it's accurate. It also shows how much percentage of the company's ownership is being offered to the public, which is important for investors to know.

Unlike many other government documents, Form S-1 is accessible to the general public. This means that anyone, including potential investors, can easily access and read the information in this document. It helps people make informed and transparent decisions about whether to invest in the company.

In 2012, the JOBS Act introduced a change for "emerging growth businesses," which allowed them to keep their Form S1 private up to 21 days before their roadshow IPO. This method of security offering became popular among well-established companies, throwing investors at a curveball.

On January 19, 2016, the Fixing America's Surface Transportation Act (FAST Act) condensed the financial statement disclosure provisions in Form S-1. This allowed companies to leave out historical financial information that is not required, reducing the IPO process.

Steps to filing a Form S-1

To file a Form S-1, companies can use the SEC’s online system EDGAR (Electronic Data Gathering, Analysis, and Retrieval), where they can submit all forms that the SEC requires.

  1. Companies need to complete a Form ID. A form ID is an application needed to apply for a Central Index Key (CIK).
  2. Apply for the Central Index Key. CIK is a 10-digit access number needed to file on EDGAR. It also identifies corporations and individuals who have filed disclosure with the SEC.
  3. Submit your filings. Files must be submitted in HTML or plain text format.
  4. Pay the registration fee. The registration fee can vary by the number of securities to be registered, the maximum offering price per unit, the maximum aggregate offering price, etc. 

The SEC's website contains additional information regarding EDGAR and the registration process. The process for filing for the IPO can take as little as 12 weeks to as long as 6 months. Of course, this time varies based on how many changes and amendments you might need to make and the market cycle.

How do I find a Form S-1?

To find a company’s form S-1, you can use the same Edgar system previously mentioned. Once on EDGAR, you’ll need to go to the Company-specific filing look-up found here.

Once on the company search system, you can type in the company name, ticker symbol, or CIK. So, for example, if we wanted to find Poshmark’s initial registration form, a social e-commerce selling site that went public in 2021, we would type “Poshmark” into the search bar.

After entering your search, there will be many document options to view. But to easily find the file you are looking for, you can click the search filing option on the right side of the screen and type “S-1” into the filing search bar option. 

There you will be able to view the form and all variations. For Poshmark specifically, you will see four Form S-1/A files but will need to scroll through to find the original on the earliest date it was reported. These steps work for all publicly traded companies registered with the SEC.

How do I read a Form S-1?

Now that we found the form, you are probably wondering… what now? A key step in approaching the form is understanding what information you need to retain.

 

From an investor's perspective, these are the most significant document findings to look out for

1. Related Party Transactions 

Show whom the company is working with and who is supporting the company's IPO.

2. Capital Stock and Underwriting

This section directly describes the securities the company is selling. Here you can find shareholder’s rights, investment banks, the number of shares being offered, and the amount of capital they expect to raise. 

3. Executive Compensation

Typically overlooked, this section demonstrates the value of senior management’s leadership.

4. Management Discussion and Analysis

This is where the company will clarify the context around the financial statements seen in the document and explain risk factors that affect their long-term prospects. Operating metrics are also useful in tracking efficiency and quality. 

5. Selected Financial Data

The most valuable section is where you can find financial statements, such as the balance sheet, income statement, and cash flows. Metrics are presented quarterly, and the commentary behind the numbers also plays a big role.

6. Income Statement

Although a part of the selected financial data has already been stated, it’s important to be able to read a company's income statement to evaluate a company's profitability and market performance. Here are some questions to ask yourself:

  • How much money is the company bringing in? (Revenue)
  • How much do their daily operations cost them? (Operating Costs)
  • How much money is left after subtracting a company’s expenses? (Profit)

Example of a Form S-1

Now that we know how to find and read the form, we can apply what we learned to our previous example of Poshmark. They offered 6,600,000 shares of its Class A common stock at $42.00 per share. 

Source: SEC

We can also see that they amended the form 4 more times after their initial registration. If we wanted more information on whether these would have been good investments at IPO, we could refer to the consolidated financial data, MD&A, etc.

One thing that catches the eye is the duration of time between each amended form. For example, all amendments took place in February, less than one month from their initial filing.

Furthermore, other aspects we can look for in Poshmark specifically are their footnotes. Footnotes include buried details of an investment that are usually overlooked.

In Poshmark footnotes, we can see an explanation for their convertible note financing and Contractual Obligations and Commitments. Investors can get an insight into what caused these numbers by paying close attention to these details. 

Investors could also look at the S-1A filings if they wanted to. These also provide in-depth information about the company's business and operations. Again, this information is important for potential investors to evaluate the company's financial stability and potential for future growth. 

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    Researched and authored by Emily Rustom | Linkedin

    Reviewed and edited by Justin Prager-Shulga LinkedIn

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