In 2020, the number of IPOs reached 480, up from 233 in 2019, and this uptick in public offerings continues to rise in 2021. IPOs can be an attractive and strategic route to funding growth and accessing liquidity, but it’s not a short-term solution. A successful IPO means implementing wide-reaching change across your organization, right down to your corporate culture. These changes don’t end after your IPO either; there is plenty of work to be done afterward to ensure that your organization is able to successfully operate as a public company for years to come.
In light of this, we sat down with Jack Hensley, Manager of Partnership & Channel Sales at Q4, who has over 25 years of investor relations and capital markets experience, much of which was spent working directly with companies going through the IPO process. Below is his advice on what companies need to know in order to thrive in a post-IPO environment.
How can companies prepare for post-IPO life, even before they IPO?
Start planning in a way that will serve you past the media fanfare. By that I mean you should start running an internal quarterly earnings process exactly as you would once your company has gone public. This may seem obvious, but you’d be shocked at how few companies do it prior to becoming a public company. The reality is that it’s not just a matter of scaling and adapting what you’re already doing – the earnings process involves a lot of practice and has a lot of hitches that need to be ironed out before you can successfully navigate it. For example, you’ll need to be prepared to explain your financial statements and performance. Don’t assume those numbers are self-evident.
How can your company adjust to the increased attention from the media?
I’ve found that private companies are often not aware of just how much scrutiny they’ll face once going public. Communication across teams and departments is incredibly important since your corporate performance will be in the media spotlight, on the news, and all over the web. The market is an incredibly fast-moving environment and it demands fast responses to investor questions and requests. There are constant changes in the capital market and corporate governance regulations, and so newly listed companies really need high-quality financial communication to provide clear insight and adapt to these changes. Take into account what the “media” means today. Beat reporters, staff writers, offshore content developers, and artificial intelligence (AI) will be reviewing and analyzing your communications. It’s important to develop your content for these various audiences to ensure your message is received in a consistent and accurate manner.
ESG is also going to be important for 2021. Not just from an investor interest standpoint, but tougher enforcement and other ESG-related reforms are among the items said to be on the agenda for Gary Gensler, President Joe Biden’s pick to lead the SEC. Specifically, that there are going to be changes coming that could require public companies to disclose climate risks and greenhouse gas emissions.
How can a company maintain momentum after an IPO?
While the IPO process will create a lot of excitement about your company in the media and among investors, that buzz will slowly fade over time unless you work to maintain the market’s interest. Having an IR professional or agency who works well with your bankers, is familiar with your industry, and familiar with potential investors is an important component of maintaining success. Your IRO will help build out your post-IPO strategy and guide communications to stakeholders and the media throughout the process and into the future. Whoever you choose for your company’s IR function needs to cultivate relationships with key analysts, helping them to understand your business, keeping in mind that it really takes proactive and strategic planning to build those strong relationships.
Also, allow data to be your friend when trying to understand who is demonstrating interest in the company through their indirect actions. Analyzing recent and historical data of who’s attended earnings calls, investor days, or visited your IR website and press releases can add value to your investor targeting efforts or provide an early alert to potential activist interest.
For IROs, what’s your advice for creating a long-term growth plan post-IPO?
IROs need to work with the C-suite to ensure that the company is either meeting or exceeding the expectations they set out at the time of their IPO. This will demonstrate to investors that they’re successfully executing their business plan, consistently meeting financial targets, attracting the right investors, and ensuring regulatory compliance. To set yourself up for success, define the key metrics that will continue to drive the business forward after the IPO. Monitor them closely and use them to create a framework for analysis, helping to guide any discussions around performance. It’s also important to create and nurture an ongoing dialogue with the investment community and key figures in financial media, which will help you to attract equity research coverage.
While your IPO may feel like the most important transaction for your company, it’s really just one of many milestones of being a strong player in the market. Maintaining that pre-IPO momentum means taking proactive measures to establish share price stabilization and active trading support, as well as targeting a strong investor mix and long-term pipeline. Learn more about effectively targeting the right investors by reading How to Navigate the New Normal for Investor Targeting.