Holding an initial public offering is a significant milestone in a company’s journey, and it requires a cohort of experts to navigate through the process. However, while ample support is available for the planning and preparations leading up to an IPO, many company founders find themselves at a loss on what to do in the aftermath.
Even though the IPO process has concluded, there are several crucial considerations to continue with post-public offering. It’s imperative to acknowledge that the communication with investors must persist even after the IPO is completed.
“Investors want to be educated and nurtured. It’s a process,” explains Alyssa Barry, principal and co-founder of IRLabs. “The infamous quote, ‘Build it, and they will come,’ stands true, but the key word is ‘build.’ You need the team to play; the fans need to be served; the cheerleaders need to hype the crowd; you must nurture fan loyalty; you need to get creative; and the team needs to perform to keep the fans coming back more. Just replace the word ‘fans’ with ‘investors.’”
Here’s what you need to focus on after your company has just completed its IPO.
Stabilizing and Insider Lockup Post-IPO
Following a company going public, the underwriter plays a crucial role in stabilizing its shares in the market. The initial days of trading are highly volatile, and as a result, underwriters work on stabilizing the new stock during the 25 days post-IPO. Measures such as attracting recommendations from analysts and creating a market for the newly issued shares are taken. Additionally, the underwriter may provide additional stabilization support by purchasing some of the new shares at or below the offering price to help balance the order imbalances in the new stock.
Moreover, post-IPO lockup periods are also established for most newly issued stocks, during which company insiders and early investors are restricted from selling any of their shares. This lockup period aims to allow the new stock to settle without additional selling pressure from insiders and typically lasts between 90 to 180 days, a period predetermined during the IPO registration process.
Securing Analyst Coverage
Following the 25-day quiet period post-IPO, the market shifts from relying on official disclosures to external sources for information about the company. Therefore, it’s crucial for companies to promptly engage with analysts to secure coverage of their stock.
Collaborating with communications or investor-relations specialists to connect with financial analysts covering similar companies is beneficial. These professionals can assist in navigating the capital markets, communications, press releases, roadshows, and events and ensure that the messaging is precise.
It’s advisable to target analysts who cover companies not only in the same sector and industry but also in size and other relevant factors. Additionally, laying down a clear strategy and a three-to-five-year revenue plan, including achievable goals, sets the stage for analyst coverage from the onset.
Emphasize Profitability Transparency
Transparency about profitability is crucial. Corporate leadership should
Investor Guidelines Following an IPO
It’s crucial to cement the path to profitability when undertaking an IPO these days. According to Chief Strategist, David Nelson, at Belpointe, the days of entering the market with little or no earnings and waiting years for profitability are long gone. Investors are now favoring transparent timelines for achieving profitability, as the risk-free rate of return provides an attractive alternative.
Nelson advocates for under-promising and over-delivering. Managing and exceeding expectations is the key to securing unwavering support from the institutional community. It’s clear that Wall Street is highly intolerant of missed expectations, making a compelling case for diligently managing and surpassing them.
Analyst coverage is not a guaranteed immediate outcome post-IPO. Building relationships with analysts is a gradual process that demands patience. It’s prudent to maintain open lines of communication with analysts who might potentially cover your stock in the future. The period following the IPO is critical for establishing and nurturing these relationships, aiming to secure coverage post the quiet period.
Strategic Investor Relations
Besides seeking analyst coverage, rapid establishment of operations in investor relations (IR) and public relations (PR) are equally pivotal. All communication channels must function effectively post-IPO to prevent the loss of investor and public attention. IR entails identifying potential institutional investors and building connections with them. Reaching out to investors who engaged during IPO roadshows but did not make purchases is a viable starting point, as they exhibited interest and may need more information before committing.
Maintaining relationships with investors who bought shares is critical to sustain their interest and prevent them from divesting. An effective IR strategy hinges on clear, consistent messaging through corporate materials that resonate with investors. A direct address to shareholders following an IPO, as suggested by Jennifer K. Zimmons, Ph.D. MBA, can significantly influence investors’ perceptions and engagement with the company.
An investor day soon after the post-IPO quiet period could be beneficial if there is substantial interest.
Outreaching through Public Relations
On the other end of the spectrum lies PR, which focuses on the broader public and the media. A well-rounded PR strategy involves a variety of experiential events such as conferences, roadshows, boutique investor events, and webinars to elevate the company’s visibility. These events create numerous opportunities for media exposure, networking, and business advancement.
Additionally, a robust PR strategy encompasses the regular publication of articles, social media posts, and other media placements. According to Chris Tyson, Executive Vice President of MZ North America, thought leadership pieces and interviews with industry experts bolster a company’s presence in the media and solidify its credibility in its respective industry.
Implementing meticulous and systematic IR and PR strategies lays down the groundwork for post-IPO success, keeping the company and its stock in the limelight. The IPO journey is not merely about entering the market; it’s about actively engaging with investors and the public, establishing a firm footing, and sustaining momentum to drive the company towards profitability.
Challenges and Opportunities of Taking Your Company Public
The Importance of a Specialized PR Team
When venturing into the public markets, companies often underestimate the necessity of a specialized PR team with experience in working with publicly traded companies. The transition to a publicly traded status brings an array of additional requirements, such as SEC filing obligations, quiet periods, embargoes, and other regulations. Failing to navigate these requirements adeptly can jeopardize a company’s standing and increase the risk of fines or audits.
As such, it becomes imperative for publicly traded companies, particularly those newly public, to engage PR experts who are well-versed in the intricacies of the public markets. These experts play a crucial role in safeguarding the company’s image, ensuring compliance with regulatory guidelines, and enhancing shareholder value.
Furthermore, a specialized PR firm should equip companies with a team of content creators capable of crafting compelling narratives to showcase the company and its offerings. Effective communication strategies during an IPO and beyond can bolster a company’s position in the public arena.
Personal and Employee Wealth Management
Beyond the corporate realm, startup founders are often confronted with the challenge of monetizing their stakes post IPO. While going public may seemingly elevate their wealth, it can also entail temporary liquidity constraints, with a significant portion of their net worth becoming locked up. Transitioning from a private company executive to a publicly held firm demands careful consideration of personal wealth management.
To address these challenges, founders must devise strategies to navigate the 25-day quiet period and establish preset trading plans. Additionally, it is crucial to plan the exercise of stock options and mitigate concentration risk by diversifying personal wealth. Seeking guidance from financial advisors specializing in assisting executives of newly public companies can be invaluable in managing this major transition.
This is Just the Beginning
Going public marks merely the initial phase of a company’s journey, signifying the start of an enduring narrative. Adhering to regulatory requirements post-IPO is essential, with non-compliance carrying the potential for substantial legal and regulatory ramifications. However, with effective communication strategies post-IPO, a company can not only navigate these challenges but also thrive in the public domain.
Gearing up for the public markets necessitates a holistic approach, encompassing specialized PR support, prudent wealth management, and unwavering commitment to regulatory compliance. The successful navigation of these challenges can pave the way for sustained corporate growth and resilience in the public sphere.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
