An IPO is a major milestone in the life of a company, and it is important to prepare carefully.
A compelling story is essential, as you will be competing for market attention with more than 2,000 other possible equity investments. In 2018, 95 companies listed on the ASX, raising $8.4 billion in new capital, so there is significant reward for good communication. Clear and memorable messages help to build your relationship with financial supporters. Transparency will win trust.
The best way for an organisation to prepare is to act like a public company before the float, which will ensure a less stressful transition.
While planning an IPO, six months to a year before an IPO, executives benefit from an external critical sounding board to develop and refine their equity messages. An investor communication professional can focus on the financial and non-financial messages that institutional investors need to know and help you to refine them.
This is important as many companies underestimate the accountability and scrutiny demanded by the numerous participants in the market – including investors, regulators, bankers and the media – and the necessary skills to build and maintain investors’ support in fluctuating markets. You will need to explain your business so that people who don’t know it can understand.
An experienced investor relations professional can provide a linchpin connecting financiers, lawyers, corporate advisers, tax and valuation experts, industry specialists, cornerstone investors and other stakeholders.
Having helped executives to navigate similar courses before, they can assist to develop your communication strategy and advise on what and when to communicate from an external perspective.
Simple to understand, succinct information that highlights key concepts – your ‘unique selling proposition’, total addressable market, business strategy, how the company makes its money, regulatory headwinds and tailwinds, industry trends – all need to be validated and clarified so that your company’s investment proposition will not be overlooked.
Information should also be communicated to employees, so that they understand and continue to support your business. Their goodwill can be a key factor in the ability to attract and retain talent.
Investors evaluate factors such as management experience, innovation, business model, market position, corporate governance, cost management, growth track record and more. You will need to convey your vision for the company. Economy and clarity are essential and for this to be achieved, executives need to take the time to practice and refine their messages.
Once prepared, this information can be disseminated to the market through the prospectus, management presentation, roadshows and one-on-one investor meetings.
The quality and frequency of corporate disclosure are key factors influencing the cost of capital. Perceptions about a company’s transparency, projects and management will contribute toward a successful listing. However, it will be important that your messages are not ‘overcooked’ so that investors remain supportive on the first day of trading and in the secondary market.
Completing a successful IPO will mean that the company delivers on its promises. Those that are well-prepared for financial and regulatory scrutiny will be the most comfortably positioned to take advantage of the runway opportunity that the IPO provides.