Initial Public Offerings: Increasing Capital and Increasing Risks

Initial Public Offerings Security
October 13, 2023

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Initial public offerings (IPOs) are a major undertaking for private companies, requiring them to undergo extensive due diligence and demonstrate their ability to meet the Securities and Exchange Commission’s (SEC) requirements. In return for meeting these thresholds, companies can access large amounts of capital to grow their business while also providing large compensation for their founders, leadership, and long-time employees. The rapid wealth gains and heightened transparency surrounding IPOs can increase a company’s security risks by exacerbating tensions regarding inequality and inviting greater scrutiny among other physical, reputational, and cyber challenges. Companies pursuing an IPO should include security planning as part of their overall preparation to not only protect the company, its assets, and the success of its IPO, but also its leadership and employees. 

Potential security challenges directly associated with an IPO can include the following:

  • IPOs provide an outlet for insiders and outsiders to express anti-wealth sentiment given the often meteoric increases in net wealth for founders and CEOs. For example, Uber drivers in several global cities went on strike ahead of the company’s IPO in 2019 to highlight the disparity between their wages and the likely multi-million dollar IPO outcome for Uber’s leadership. Similarly, San Francisco residents protested Twitter’s IPO in 2013 over fears newly-minted millionaires would raise rent in the city. 
  • Controversies regarding employee benefits from IPOs are another potential source of risk. Employees who unexpectedly missed the cut-off for stock options or received less than expected during an IPO could retaliate by divulging sensitive information about the company and its leadership. Disgruntled employees also pose a physical security risk and could violently lash out against other employees. 
  • IPOs in recent years face extra security challenges as investors’ focus shifted to tech-based unicorns, or startup companies with private valuations of more than $1 billion. These high-priced IPOs attract heavy media and investor speculation, and the resulting scrutiny may bring to light controversies that cause reputational harm. 
  • Increasing IPO scams associated with small-sized companies may also cause collateral risks for legitimate public offerings by promoting accusations of fraud. Many of these scams are driven in part by social media pump-and-dump schemes called “pig butcherings.”
  • Cyber risks increase for companies going public due to increased company transparency necessary for filing with the SEC and earning investors’ trust. Cyber attackers recognize IPOs as a sensitive moment for companies and may exploit the public offering and information released to gain access to the company’s systems or data. The threat of executive extortion also increases following an IPO as more information becomes available about the executives.  

Concentric has experience providing tailored products and services for companies leading up to, during, and after their IPO. As your company focuses on meeting IPO requirements, let Concentric help take care of your security needs. Here are multiple ways Concentric can help address threats all along your IPO journey:

  • Identify: Several types of risks, including exposed personal information and negative narratives, can pre-date an IPO and become a vulnerability as the company falls under greater scrutiny. Concentric’s Risk Assessments can help catch existing risks before they become a potential flashpoint tangled up in the public offering. Concentric can also assist in spotting real-time risks and nascent threats in the lead-up and aftermath of an IPO through regular monitoring of online threats and periodic reporting.
  • Mitigate: Concentric can provide guidance on insider threats and cybersecurity to ensure companies are incorporating best practices into their IPO preparation. Concentric also specializes in Technical Surveillance Counter Measures, often referred to as sweeping for electronic listening devices, to keep sensitive IPO information out of the wrong hands. 
  • Respond: Executive protection agents contracted through Concentric can provide your company, its leadership, and vulnerable employees with on-the-ground expertise in the event of a crisis or other safety concern. Concentric is also able to respond in the cybersphere, removing exposed personally identifiable information from online and helping to restore compromised accounts. 

As IPOs can be a time of heightened vulnerability, having a security plan from start to finish can help your company focus on making the IPO as successful as possible. Reach out to Concentric to learn more about any of our services for your IPO preparation.

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