In the 1990s, during the dotcom mania, initial public offerings (IPOs) were highly sought as investors expected high returns in a short period. However, the tech bubble eventually burst, and the IPO market returned to normal, with less expectation of immediate high returns.
Due to unfavorable macroeconomic conditions and geopolitical uncertainty, today’s IPO market is rather unstable, with 2022 being one of the worst years in IPO history, and it’s continuing to slow down in 2023.
Despite the downtrend, many companies still had their IPOs in 2022 — including Stripe ($100 billion), Discord ($15 billion), and Blockchain ($15 billion). However, the second half of 2023 is expected to be more favorable for the IPO market with expected IPOs from the likes of Klarna, Reddit, and SpaceX.
That said, IPO activity is slowly recovering — and some of the most interesting deals are yet to come.
What is an IPO?
An initial public offering (IPO) is a process a private corporation goes through when it offers its stock shares on the public market for the first time. For a privately held corporation, it is a chance to raise capital from public investors by “going public.”
Before an IPO, a privately held company receives support from a limited number of private shareholders, including early investors like the founders, family, and friends, along with professional investors such as venture capitalists or angel investors. Once the IPO process is successfully completed, a newly public company gets access to the global market and support from public investors.
What is an IPO data room?
A virtual data room (VDR) is a secure digital repository for storing and sharing sensitive data. Virtual data rooms are commonly used during data-sensitive processes like IPOs, as they make it easy to gather, structure, review, share, and disclose sensitive business information in one secure location.
A virtual data room for an IPO is a solution designed specifically for the IPO process. Using it, the issuing company securely discloses a large amount of sensitive information to potential investors.
How can a data room help with the IPO process?
As already mentioned, an initial public offering (IPO) is a complex process that involves various parties, including investment bankers, legal and accounting teams, and regulatory authorities, as well as potential investors and underwriters.
The VDR is typically managed by an investment bank or other financial institution handling the IPO process. Let’s see how an IPO data room specifically facilitates the IPO transaction.
Benefits of data rooms for IPO
1. Easy and quick preparation
2. Compliance and control
3. Advanced document management
4. Premium support 24/7/365
5. Easy and quick preparation
According to Deloitte, preparing for an IPO can take between 18–24 months, and thus underestimating the amount of work at this stage can certainly break the transaction. However, VDRs can significantly streamline the preparation process by providing an easy-to-use platform for storing and sharing critical documents.
Some of the ways in which VDRs can facilitate quick and easy preparation for an IPO are:
- Customization options to create a tailored data room to meet the specific needs of the IPO
- Mobile applications that enable investment bankers, legal and accounting teams to access and share documents on the go
- Automated indexing and organization of documents, saving valuable time for the team
- Secure access controls that enable different levels of access for various users
Compliance and control
According to Ernst & Young, companies should take steps needed to become SOX compliant long before filing for an IPO, because they often tend to underestimate the complexity of the process, thus decreasing the chances of a successful transaction.
Some of the ways in which VDRs can ensure compliance and control in the IPO process are:
- Compliance certificates that confirm that the VDR provider meets the highest standards of data security
- Audit trails that track all user activity within the IPO data room, providing a clear record of who accessed what documents and when
- Document version control that ensures that all parties have access to the latest version of critical documents
- Granular access controls that enable different levels of access for different users
Advanced document management
Each IPO process is a data-sensitive one. The issuing company, the investment bank, and the potential investors exchange many confidential documents, including but not limited to an engagement letter, firm commitment, best efforts agreement, and letter of intent.
Virtual data rooms provide an efficient way to manage and share these documents. Some of the ways in which VDRs facilitate advanced document management in the IPO process are:
- Multiple files format support that enables different file types to be stored and shared within the VDR
- Integrations with other services, such as project management tools, that enable seamless collaboration between teams
- File merging that enables teams to combine multiple files into a single document
- Built-in Q&A sections that enable teams to communicate and collaborate more efficiently
Since the IPO process can be time-sensitive, deal teams often work long hours to meet deadlines. Advanced virtual data rooms for IPO provide support 24/7/365 to ensure that teams can access critical documents and receive expert technical assistance whenever needed.
Some of the ways in which VDRs provide support in the IPO process are:
- Dedicated customer support that provides assistance and resolves issues quickly
- Real-time notifications that enable teams to stay informed of any changes or updates within the IPO data room
- Secure mobile access that enables teams to access critical documents and receive support on the go
Top 3 data room providers for IPO
When it comes to preparing for an IPO, having a reliable virtual data room is essential for facilitating the due diligence process and ensuring compliance. In this section, we highlight some of the best data rooms for IPOs.
iDeals is a solution trusted by over 1,000,000 professionals for dealmaking. Here’s what makes it such a popular choice:
- This data room for IPO offers time-efficient deal preparation. The platform takes only 15 minutes to get up and running, and dedicated support is offered all along the way.
- iDeals offers robust document management features, with support for 25+ file formats, drag-n-drop and bulk upload, auto-indexing, full-text search powered by OCR technology, and many other features.
- iDeals has industry-leading customer support available 24/7, including weekends and holidays. The assistance is offered via email, phone, and built-in live chat.
- iDeals has a unique secure spreadsheet viewer that allows accessing Excel files with formulas online. For truly secure access, the Fence view feature can be enabled. It offers a restricted view mode, showing only the central part of the document and covering the rest with a sliding barred screen.
- Lastly, iDeals offers a unique time-tracking feature that allows admins to gauge investor interest in a specific document. Issuing companies and investment banks can see all interactions with their files and drive conclusions about investor interest.
Intralinks is another trusted provider for IPO transactions, trusted for its unparalleled security features and AI-powered due diligence tools. Here are some other features that make it efficient:
- This data room for IPO offers full audit trails for simplified compliance and ensuring that confidential data is well-protected.
- Intralinks features advanced document management capabilities, including file merging and a Q&A section for efficient communication within the data room.
- Intralinks has 24/7/365 customer support to provide assistance whenever needed. Its phone support is truly efficient and replies just within six seconds.
A long-recognized name in the industry, Datasite rounds out the list of the best data room providers for IPOs. Though the solution is a bit more expensive, it offers many advantages that make it a worthy choice:
- Datasite offers many advanced security features, including multi-factor authentication, access controls, and granular permissions.
- This data room for IPO offers advanced document management capabilities, with support for multiple file formats and integrations with other services.
- Datasite also has a user-friendly interface and provides 24/7 customer support.
Now let’s summarize key findings from the article:
- IPO is the process of offering shares of a private organization to the public via stock issuance.
- Virtual data rooms for IPO are considered the most advanced and helpful ways to facilitate the IPO process.
- Virtual data rooms facilitate IPOs in many ways, including offering easier deal preparation, better compliance with regulators, advanced document management, and all-around support.
- Some of the best data rooms worth considering for IPO are iDeals, Intralinks, and Datasite.
What’s the duration of an IPO process?
The duration of an IPO process depends on a number of factors, such as the complexity of the company, its industry, and the state of the capital markets. Generally, the process typically takes several months to a year to complete but can often require more time.
How long does it take to set up a data room for an IPO?
The time it takes to set up a data room for an IPO varies depending on the provider and the complexity of the data to be uploaded. With modern virtual data room software, however, it is possible to set up a data room in as little as 15–30 minutes.
What are the most popular data rooms for IPOs?
Some of the most popular data rooms for IPOs include iDeals, Intralinks, and Datasite. Each of these providers offers a range of features designed to facilitate the IPO process, such as advanced document management, robust security features, and 24/7 customer support.
Is Google Drive safe to use for an IPO?
While Google Drive is a popular cloud storage solution for many businesses, it may not be the most reliable option for an IPO. Google Drive does not offer the same level of security and compliance features as a dedicated virtual data room, which is crucial for protecting sensitive financial and legal documents during the IPO process.