Author: Lenin Lopez
The market for companies going public is making a resurgence. Traditional IPO activity has improved, several high-profile offerings are moving forward and investor appetite — particularly around AI, infrastructure and life sciences — appears stronger than it has been over the last two years.1
The going-public discussion isn't just limited to traditional IPOs. Companies continue to evaluate multiple paths to the public markets, including SPAC transactions and reverse mergers. In some cases, timing, capital availability or broader market conditions may make those structures more attractive. That said, regardless of structure, the expectations for companies entering the public markets appear to be rising.
Investors, regulators, plaintiffs' firms and underwriters are scrutinizing new public companies more closely — focusing on governance maturity, operational predictability, disclosure credibility and board oversight. That scrutiny is also showing up in places companies don't always expect, like director and officer (D&O) insurance underwriting. Insurers are increasingly evaluating governance practices, controls and disclosure discipline when determining pricing, structure and available terms.
For boards and management teams, the question isn't just whether the company can access the public markets, it's whether the company is structurally prepared for the scrutiny that comes with being there.
This article will explore how the standards for companies entering the public markets have evolved. We'll also discuss the growing role that governance, disclosure controls and D&O insurance now play in evaluating public-company readiness.
The public markets are relatively open, but expectations have changed
Legitimate reasons for optimism remain; however, this market appears less forgiving than in prior cycles.
In earlier environments, companies could often rely heavily on narrative. Today, narrative is tested more quickly against execution.
Recent reporting around high-profile AI companies has highlighted how rapidly investor attention can shift from growth potential to more practical questions, like budgeting discipline, reliable forecasting, operational scalability and whether internal systems appear capable of supporting public company reporting obligations.
Similarly, market volatility earlier this year caused several companies to delay or reevaluate transactions amid growing concerns about valuations and predictability.2
This dynamic isn't limited to companies preparing to go public. Several public companies recently faced litigation after relatively modest operational setbacks — including integration delays, slower-than-expected customer adoption and revised guidance — triggered outsized market reactions.
The broader takeaway is that the standards associated with entering and operating as a public company continue to increase.
The structure may differ, but the governance expectations increasingly look the same
For a while, SPACs and reverse mergers were viewed as alternatives that could simplify or accelerate the process of going public.
In practice, however, the governance, disclosure and litigation expectations that follow these transactions increasingly resemble those attached to traditional IPOs.
That shift has become more apparent as regulators, investors and plaintiffs' firms have focused less on the structure itself and more on how prepared companies are to operate after the transaction closes.
Whether a company enters the market through a traditional IPO, SPAC transaction or reverse merger, investors increasingly appear focused on the same core questions:
- How disciplined are the company's controls?
- How reliable are its disclosures?
- How mature is the board and oversight structure?
- How prepared is management for sustained public company scrutiny?
Those questions become particularly important for companies that scale rapidly in private markets, where governance systems are typically more informal.
In public readiness discussions, internal reporting inconsistencies, gaps in escalation processes or disconnects between operating metrics and external messaging can quickly evolve from internal concerns into diligence issues.
That's where governance begins to intersect with valuation, credibility and litigation risk.
Boards are under the microscope earlier than expected
One of the more notable shifts in the current environment is how early boards are evaluated.
It's no longer unusual for investors, underwriters and prospective directors to evaluate whether the board's expertise matches the company's actual risk profile and whether it's equipped to oversee a public company operating in a volatile environment.
This scrutiny is particularly relevant for founder-led businesses.
Founder leadership can absolutely be a strength. But if decision-making remains overly concentrated or independent oversight hasn't kept pace with company growth, that structure can quickly become part of the diligence discussion.
Oversight expectations are also evolving.
For instance, recent government enforcement actions and litigation matters have focused less on the underlying operational or cybersecurity issue itself and more on whether the board had sufficient visibility into the risk and responded appropriately once concerns emerged.
These developments reinforce a broader point: governance is increasingly being evaluated in real time, not simply after a problem occurs.
Forecasting credibility is becoming a governance issue
Another notable shift is the increasing importance of predictability.
Investors appear far more focused on whether companies can consistently execute as they themselves have predicted, not simply whether they can grow. That focus has meaningful implications for boards and management teams.
In public market readiness discussions, forecasting assumptions have become a central point of scrutiny. When company projections rely heavily on aggressive growth assumptions, anticipated regulatory approvals, positive clinical data readouts, AI-related opportunities or acquisition-driven synergies, investors are likely to push for greater clarity around how those assumptions are being validated internally.
This scrutiny is especially relevant in the current AI environment.
Regulators have increasingly focused on AI-related disclosures and the risks associated with "AI washing," particularly where public statements appear more promotional than realistic.3
That gap between narrative and reality has already contributed to valuation pressure and lawsuits in situations where companies later revised guidance, clarified assumptions or disclosed operational limitations.
For boards, this creates a governance challenge. It's not enough to simply review forecasts and disclosures. Increasingly, boards are expected to understand how assumptions are developed, what internal processes support them and whether escalation procedures exist if facts begin to diverge from external messaging.
Why D&O insurance has become part of the governance conversation
D&O insurance is increasingly becoming part of the broader going-public discussion.
Historically, many companies approached D&O insurance placement as a transactional workstream tied to becoming public. Increasingly, however, underwriting conversations are functioning more like governance and risk assessments.
D&O underwriters aren't just evaluating financial performance. They're also focused on understanding the company's governance profile, like determining:
- How the company operates
- How decisions are made
- How risks are escalated
- How disciplined disclosures appear
- Whether the company's governance structure looks capable of supporting a public company
In that sense, the D&O insurance underwriting process has become another form of diligence that can, in certain cases, serve as a reality check for public company readiness.
Governance and D&O insurance outcomes are converging
To position themselves more favorably in insurance underwriting discussions, companies should demonstrate strong oversight structures, consistent internal reporting, disciplined disclosure practices and alignment between internal operating data and external messaging.
While governance can't eliminate certain pressures, like operating in a volatile sector or an emerging industry, it can influence:
- Premiums
- Retentions
- Available capacity
- Underwriting appetite
- The quality of terms and conditions
D&O insurance underwriters are skilled at quickly uncovering if a company's governance appears inconsistent, whether due to concentrated founder control, weak documentation practices or gaps between internal information and external disclosures.
Why governance matters after the company is public
Governance becomes particularly important given how dramatically litigation exposure changes once a company becomes public.
Recent litigation trends point to continued activity in:
- Event-driven securities litigation
- Disclosure-related claims following guidance revisions
- Governance-focused derivative litigation tied to oversight failures4
Several public companies have recently found themselves subject to litigation triggered by operational disruptions, cybersecurity incidents or revisions to growth expectations. This litigation commonly focused less on the event itself and more on what management and the board knew at the time and how that information was communicated externally.
For boards, the issue isn't whether these moments occur. It's how prepared the company is when they do, including funding potential litigation (such as the personal defense of directors and officers). That's one reason experienced directors increasingly ask detailed questions about D&O insurance programs before agreeing to join companies that are eyeing a public company listing.
To learn more about D&O insurance and governance considerations for IPO companies, visit Gallagher's IPO Hub and The D&O Notebook.
Parting thoughts
The market for IPOs, SPACs and reverse mergers may be improving, but the environment surrounding public companies has become more demanding. Investors, regulators, underwriters and plaintiffs increasingly appear focused on governance quality, disclosure credibility, operational predictability and oversight maturity.
Ultimately, the companies that navigate the private-to-public transition most effectively are often the ones that treat governance, disclosure discipline and risk management as strategic infrastructure well before they enter the public markets.
Published June 2026.
