IPO Stock Transfer Agent

Is choosing a stock transfer agent before a company goes public something management should focus on?  Or can the company trust that its law firm will do that well enough?

The short answer is any decent law firm will suggest the company use one of the several top transfer agents left in the business, meaning satisfaction with the chosen transfer agent is probable.  Moreover, not having to scrutinize the chosen transfer agent in advance of the IPO gives management more time to focus on the many other key bases to cover in the IPO process.

But there are consequences in allowing the selection of a key company vendor like the stock transfer agent to happen by proxy, for example…

  • There is no understanding at the company of the transfer agent’s overarching service philosophy.
  • No scrutiny takes place of the selected agent’s particular strengths and weaknesses compared to the competition, especially important in the area of technology.
  • Influence over the structure and competitiveness of the fee schedule within the service agreement is typically forsaken.
  • Negotiation of key agreement elements like the termination clause and limitation of liability is often ignored.
  • The choice of who the company’s relationship manager will be – and where – does not usually happen.

Like most important vendor decisions, it should be made by the service user – the company – possessing all necessary information to make the best selection for the organization’s particular needs.  This also ensures that, if the service agreement and pricing are set up on an automatically renewing basis (usually the case), the danger of automatically renewing problems with them is minimized.

If help is needed by the company in its transfer agent evaluation and selection process, we are a great resource ().