IPO Idea-and-Execution Scorecard
Judge an IPO separately on strategic necessity and execution quality.
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 7
- Confidence
- 94%
The IPO Idea-and-Execution Scorecard evaluates a public offering on two independent axes. The first is strategic necessity: what does going public enable, and could the company obtain the same capital, liquidity, credibility, or compensation flexibility through another route? The second is execution quality: was the company ready, was market timing reasonable, did pricing reflect fundamentals, and were advisers and investors economically aligned? Separating these questions prevents a necessary financing from receiving an automatic passing grade despite avoidable structural mistakes. It also prevents weak short-term market sentiment from obscuring a sound strategic decision. Applied to Square, the hosts viewed public liquidity and growth capital as legitimate needs, while criticizing the late timing, down-priced offering, ratchet dilution, and lead underwriter's apparent incentive conflict.
Origin
Acquired's hosts evaluated Square's IPO by separating whether going public was the right business decision from how well the offering was executed.
Core principles
- 01Separate the decision to go public from the way the offering is executed.
- 02Ask what the IPO enables that existing financing cannot.
- 03Compare public financing with realistic private-market alternatives.
- 04Inspect incentives, timing, pricing, and investor protections independently.
- 05Do not let later stock performance erase process failures.
How to run it
- 1
Define the IPO objective
State the specific constraint the offering must solve, such as growth capital, employee liquidity, acquisition currency, or access to public investors.
Pro tip Require a measurable post-IPO use for the capital or liquidity.
Watch out Prestige and headline valuation are not sufficient objectives.
- 2
Model the alternatives
Compare the IPO with remaining private, raising another round, reducing spending, using debt, or waiting for stronger conditions.
Pro tip Include preferences and dilution rather than comparing headline valuations alone.
Watch out Private valuations with investor protections are not directly equivalent to public-market values.
- 3
Assess readiness and timing
Review business predictability, unresolved commercial risks, reporting maturity, employee-equity pressure, and public-market conditions.
Pro tip Separate controllable readiness issues from uncontrollable market sentiment.
Watch out Waiting can improve readiness while simultaneously worsening employee retention or financing terms.
- 4
Audit economic incentives
Map how founders, employees, existing investors, bankers, and new shareholders profit or lose under different IPO prices.
Pro tip Test incentives at prices below, within, and above the proposed range.
Watch out Ratchets can make an underwriter or existing investor benefit from a lower offering price.
- 5
Grade the idea
Decide whether going public was strategically superior to the realistic alternatives available at the time.
Pro tip Judge using information available before the outcome became known.
Watch out Do not use later stock appreciation as proof that every earlier decision was sound.
- 6
Grade the execution
Evaluate preparation, timing, adviser selection, pricing, structure, dilution, and communication independently.
Pro tip Document which execution failures were avoidable.
Watch out A strong company can still conduct a poorly executed IPO.
- 7
Form the overall judgment
Combine the strategic and execution assessments while preserving the distinction between them.
Pro tip Report both sub-scores when one dimension materially differs from the other.
Watch out A single grade without explanation can conceal the most useful lesson.
In the wild
Square needed capital and public liquidity after accumulating private financing, employee-equity pressure, and a high preferred valuation. Going public addressed real constraints, but the offering priced below its range and far below the previous private valuation. Ratchet provisions caused additional dilution, while Goldman Sachs participated in the protected private round and led the IPO.
→ The hosts treated the IPO as a reasonable strategic idea weakened by poor timing and execution.
A growing software company needs employee liquidity but does not urgently need operating cash. The board compares an IPO with a structured private round, models dilution and preferences under downside scenarios, and discovers that waiting would preserve headline valuation only by imposing costly protections.
→ The board can judge liquidity strategy separately from the optics of valuation.
Common mistakes
Comparing headline valuations
A protected private valuation and an unprotected public valuation represent different economic claims and should not be compared at face value.
Ignoring adviser conflicts
An adviser with investments, ratchet protection, or other exposure may benefit from an outcome that harms common shareholders.
Letting the outcome rewrite the process
Strong post-IPO performance can coexist with poor offering execution, just as weak trading can follow a defensible decision.
Is it for you?
Best for
This is best for founders, boards, employees, and investors evaluating a late-stage company's path to public markets.
Not ideal for
It is not ideal as a substitute for legal, accounting, or securities advice during an actual offering.
From the transcript
“One is is always um, you know, did this IPO allow them to do something that they previously couldn't do before? Like, was it a…”
“But when you have your investor hat on, that's why you really need to value companies based on fundamentals.”
“Like it's it's a it's a good idea that was at the wrong time with terrible execution.”
From the episode
The Square IPO