Going Public: Before You File

IPO

In this three-part conversation, Sharon Merrill President and Partner Maureen Wolff shares insights on the IPO process from an investor communications perspective. In this initial conversation, we discuss preparing for life as a public company before the registration statement has been filed.

The Podium: Why do some companies start preparing for an IPO well in advance? 

MW: Planning for an IPO in advance actually leads to a much smoother process and greater success after the IPO. Because the registration process is so intensive and time-consuming, it’s a really good idea to begin thinking and acting like a public company before filing the S-1, S-11 or other relevant registration statement. When you look at the IPOs that have made smooth transitions to the public markets, they are most often those that began the long-term transformation to being a public company very early on.

The Podium: Can you provide an example of how companies should start thinking like a public entity far in advance?

MW: Establishing corporate news flow early on is important. Companies should develop a pipeline of news releases so that they already have visibility in the media by the time they go public. This visibility, in turn, will create pre-IPO recognition in the investment community. To put it simply, it’s about buzz. If your company is already well known, chances are, the press and social media have been wondering openly when – not if – you will go public. But if yours is like most of the small-caps preparing for public life, you will need to generate more interest. Establishing a precedent for corporate announcements early on is also important, because once you hold your IPO organizational meeting, you can only communicate in the way you’ve been communicating during the IPO “quiet period.”

The Podium: How should companies think about the type of news flow they want to establish?

MW: In creating the pipeline of news releases, a firm should begin thinking about the type of information it will want to be communicating to investors on a consistent basis as a public company – whether that be new contracts, strategic milestones, management changes and additions to the board. Demonstrating a solid track record of communication/press release protocols will serve you well as a public company, particularly if you are faced with challenges or disappointing results that must be addressed.

The Podium: What about public speaking? Public company executives spend a lot more time communicating with the public, don’t they? Should we be prepared for that?

MW: Developing a public presence at the individual management level is essential. A company may want to think about developing the public persona of the management team by having executives gain visibility at trade shows or by attending private investor conferences. In addition to creating visibility for the team, these settings will introduce management to the types of questions investors will ask, while also providing presentation experience. Other ways to develop a public presence for management could include writing bylined articles in mainstream publications or conducting interviews with local or trade media. Media and presentation skills training can be highly effective for executives, especially if you are relatively new to public engagement.

The Podium: What else should a pre-filing company be thinking about from a communications perspective?

MW: It’s also good to think about your company’s identity. How do you want to define it? What are the corporate mission, vision and values? What is the culture like, and is that something you want to be communicating? Many times, companies don’t think about these things until the prospectus document forces them to, but it’s better if you have a handle on where and what you want the company to be. You should have a vision of where the company is going, and all your employees should be able to embrace that vision.

The Podium: What are the benefits to being proactive in generating visibility for management and the company prior to going public?

MW: The old adage is that even if your company isn’t telling its story, someone else is. And in this age of social media, that is especially true. By creating a proactive approach to communications before you file, you have an amazing opportunity to accomplish a number of goals. You form and communicate the corporate identity; management gains visibility and credibility while becoming more comfortable in public settings; and you generate interest from both customers and investors. All told, you accumulate goodwill, and that will be invaluable after a disappointing quarterly earnings announcement or in the midst of a corporate crisis.

The Podium: How has the Jobs Act affected the IPO process?

MW: The ability of a so-called “emerging growth” company to confidentially submit a draft registration statement for SEC review has been a major change. Management can receive comments from the SEC and update the registration document without worrying about the outside world looking on in real time. Also during this period, the company can conduct “testing the waters” meetings with qualified institutional investors, where management can determine whether their message will resonate with investors and what questions investors are most interested in having answered. While companies still need to be well prepared for the testing the waters meetings, it gives them the opportunity to refine the positioning of their investment thesis, prior to the official roadshow after the public registration filing.

The Podium: One thing we haven’t mentioned is the corporate website. Should companies be addressing that at all before they file?

MW: Certainly. When the S-1 is near completion, the corporate website needs to be reviewed and updated to ensure that it is in alignment with the messaging in the registration statement. For example, the descriptions of the company, its products and its markets should be consistent between the S-1 and the website.

In addition, having the Investor Relations section of the website go live on the day that the company starts trading is essential, and this can take a few months to develop. The vast majority of companies use an outside IR website vendor for this service.

The Podium: Sage advice, to be sure. Thank you, Maureen. We look forward to speaking with you next week, when we’ll discuss the post-filing period.

Maureen Wolff is president and partner at Sharon Merrill, an investor relations strategic advisory firm that includes among its services Regulation FD, disclosure and Wall Street 101 training for employees, management and boards of directors.  Maureen leads the implementation of the firm’s strategic vision and provides high-level strategic counsel to clients. She is a past chairman and board member of the National Investor Relations Institute (NIRI) and a current member of NIRI’s Senior IR Roundtable. She is a trusted advisor to CEOs, CFOs and boards of directors on critical communications issues including corporate governance, shareholder activism and proxy contests, CEO succession planning and disclosure issues.

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