By Gregory Sichenzia, Partner and Founding Member, Sichenzia Ross Friedman Ference LLP
Supported by favorable market conditions and increased consumer spending, the IPO market is beginning to heat up, with 32 deals priced by the end of June, the busiest month on record in 2015. Why are more companies deciding to go public now? Their goals are simple: to accelerate the growth of an already successful private business and establish it as a major industry player in the public sphere; to attract increased capital and raise larger amounts of money; and, to maximize the value of the company for its existing shareholders.
As a company prepares to go public, it is important to understand that a communications strategy is just as valuable as a company’s IPO execution plan when it comes to supporting and achieving the above goals. Of course, there is not one single cookie cutter approach to developing a successful communications plan pre and post IPO, especially given that approaches vary depending on the type of product or service being offered.
To help companies navigate the challenges presented when going public, below are best practices on how to structure an effective communications strategy pre and post IPO.
Developing Your Equity Story Pre-IPO
Deciding to go public is a transformational event for companies, and smart planning is tantamount to success. Leading up to the initial public offering, it is crucial to develop communications strategies for the short-term (3-6 months) and long-term (1 year and beyond) to support and achieve a company’s IPO objectives and goals.
The goal during the pre-IPO process is to show future investors that going public is the next logical step. Before going public, companies must provide audited financial statements documenting its performance for the last two years or since its inception. This lends the company credibility and builds investor confidence. All information that a company relays to the public should position it as an entity that has steadily increased its value and is ready for growth, whether that information is disseminated via social media, press releases, or media interviews. To that end, a company needs to ask itself if its public image will support eventual valuation, and if so, they ways in which to communicate the company’s position in the market place.
The first step is to develop a compelling equity story that is easily digestible and relatable to the investor audience. Remember, investors are attracted to businesses with major growth potential that will generate cash and a successful bottom-line performance. Thereby, the story should be an extension of the company’s brand and emphasize its overall fundamentals, including its talent and management team, strong business track record, upward growth as a private company, its core values and post-IPO plans. It should also focus on the value the company has brought to its customer base rather than for pure promotional purposes.
In order to get the story told to investor audiences clearly and effectively, smart companies develop strong relationships with influential digital, print and broadcast media leading up to the IPO. Conversations can be on background and off the record in order to educate targeted reporters on the company’s growth equity story without sensitive information about the company and its value landing in print or on television. Finally, aligning a social media strategy can be a useful tool in helping to communicate the company’s equity story consistently across all public facing platforms
Keep in mind, there are many regulatory requirements in place that govern the public offering process, including an SEC mandated pre-IPO period in which companies are restricted in the ways they are able to communicate with the public. But, between filing an IPO prospectus and the final closing, companies seeking to go public go on an IPO road show in which key investors meet the company’s senior management team face-to-face in order to realize shareholder value. This is the time in which all of the company’s planning around its communications strategy come to life. The success of an IPO road show hinges on consistent messaging, the establishment of a succinct “elevator pitch” and presentation, as well as clearly understandable talking points.
We are a Public Company, Now What?
Public companies face a level of scrutiny that private companies are not beholden to, including formal disclosure requirements to which a public company must adhere. In fact, companies must regularly deliver news to investors and shareholders quickly and effectively regarding the health of the company. Public companies also need to develop strategies to handle the onslaught of media attention post-IPO, demands of transparency by the public and stakeholders, and establish contingency plans in case a company’s public perception falters after a negative post-IPO stock performance.
Below are some of the important questions that companies should think through and incorporate into a post-IPO communications strategy:
- How will we sustain interest in the company post-IPO?
- How will we continue to attract additional investors and raise capital?
- How can we maintain a positive public image in the face of potential negative press?
- How will we keep established pipelines of communication open with our shareholders and the public?
- What are the resources available to us?
- Should we hire a dedicated investor relations (IR) team? Or should we use digital IR resources to disseminate information to the public, such as setting up a section of the company’s website in order to update shareholders on relevant info?
- How can we add to our growth equity story now that we have just completed a major growth spurt? Or, how should we re-evaluate our brand post-IPO goals to develop a refined equity story?
Like with any other facet of running and scaling a successful business, investing the time and resources upfront to develop a well-thought out communications strategy will optimize the communications process and eliminate inefficiencies both before and after going public. Utilizing the above tips will help better position a company for success as it leads up to going public through being publically listed.