FINALLY A PUBLIC COMPANY, WHAT’S NEXT?
Ten Investor Relations “To Do” Items
by Simona D’Agostino Reuter
For several months, up to the first day of trading, the Company with all the Management has been exceptionally focused on creating and issuing tones of documents, spending time only with lawyers, auditors and bankers.
After this PRE IPO PHASE, the new life is finally starting.
A good and strategic IR Plan is highly recommended.
Here are Ten “to do” items for ensuring the Company can land smoothly once the pricing is out.
1) Educate the management team in disclosure rules and in investor relations topics.
Investors and analysts reach out directly to IROs and C-level executives to gain insights about the Company.
These executives should be well-knowledgeable of the Euronext and other EU related regulations, as well as of the Company’s disclosure policies, in order to avoid selective disclosure, that is, the disclosure of material information to a single person or a limited group of people, or even worse, regulations pitfalls. In particular, especially in the case the senior executives have never worked for a public company, they need to be trained in all IR best practices, relating to earnings calls, one-on-one investor meetings, and conference presentations.
2) Conduct executive presentation tutoring and rehearsing.
Even the most seasoned public speakers can benefit from coaching to improve their presentation skills.
Prior to the IPO roadshow, it is of primary importance that the team receives some presentation training (in or also in English when possible), so that they can communicate the company’s story effectively. Moreover, it is essential to draw down also a number of questions – and plausible answers – as coming from investors and analysts.
3) Try to train all employees about conduct the new public company responsibilities.
For employees who have never worked for a public company, life after the IPO can be a culture shock. Every member of the team needs to understand what changes, why the level of corporate-wide communication may change, and—most importantly—why it is essential to maintain the confidentiality of all material non-public information. Have the general counsel, IRO or IR firm, conduct sessions with employees to ensure they understand their basic responsibilities and the serious risks in play—from insider trading violations to shareholder lawsuits.
4) Determine the Guidance approach.
That is a fact: there is no one-size-fits-all approach to guidance. It is often considered that guidance are just earnings and revenue projections, while it is much broader, encompassing multiple financial and non-financial metrics. Some companies provide qualitative, directional information on a set of financial metrics rather than specific numerical guidance.
We suggest to take a look at the best practice and at what peers disclose in order to be more aligned to the expectations from the financial market.
Going forward, it is essential to determine how much visibility the IROs and the CFO have regarding your quarterly and full-year performance. If visibility is limited, then caution is certainly warranted. Above all, better to under-promise and over-deliver.
5) Review and target the shareholder base.
It is crucial in our view to carefully select the long-term shareholder base.
Since many of the IPO buyers of the stock will start selling immediately after the pricing, there certainly is an opportunity – which may turn into a threat – to begin to shape the new Company shareholder base of the future. Develop the “right” base by targeting a range of investors whose criteria match the Company’s current investment characteristics or the profile expected in the next three to five years. Then, aggressively hit the road after the IPO to meet with these targeted investors.
6) Implement the IR website.
IR website must be ready to launch on the day of your IPO pricing. It is most cost-effective to use an experienced IR website design and hosting provider that can develop your site based on design cues from your corporate website while aggregating content in a way that is both user-friendly and in line with regulations. The website is arguably the most important touchpoint for communicating with stakeholders, so it is key to tell the story in the most engaging way possible. Consider using video to make the Company’s story come alive with virtual product demos, plant tours, and management interviews.
7) Organize the next Investor Meetings.
Going forward, we see continued popularity of Capital Markets Days (CMDs) as a key tool to reignite engagement. These events have evolved, with the hybrid format increasingly seen as standard and virtual elements, such as remote speakers and virtual site visits, increasingly being incorporated into events. Social media use for investor engagement remains mainly limited to LinkedIn and Twitter posts highlighting key developments, or sharing of video content via YouTube.
It is also mandatory to accept to attend a certain number of Investor events and Conferences. In addition to non-deal roadshows and investor conferences, it has to be planned to host an investor day at some point. These events are a great way to raise the IR profile, demonstrate how the Company has implemented the strategy, and to show the leadership team. These are always loved by the financial community.
8) Keep the attention high.
After the first weeks following to the IPO, the attention on the Company and on the stock performance will gradually decrease. This is something inevitable.
It is crucial then to keep the consideration of the market high, through different tools and actions – i.e. investor recalls, new brokers’ reports, tailor made newsletters ..
We are experiencing an evolution of the investor deck, the days of 30-plus-page investor presentations are behind us. In 20 slides or less, companies are seeing success with the expectations to simply illustrate their thesis and value proposition. Investor decks embedded with videos, links and QR codes will tell a story and hold attention. Focusing on quality content, a clear vision and a pathway to growth are the true ways to get good opportunities.
9) Decide how to handle the IR function.
Some companies have in-house investor relations officers (IROs), others outsource to an IR firm, and some use a hybrid model. At a minimum, what is relevant is to be sure to take as much of the IR “busy work” off the plates of the CEO and CFO as possible.
The IR role requires a particular skill set and might not be an easy hire, but retaining an IR firm can help bring the right internal candidate, perhaps a member of the FP&A team, up to speed. Additionally, an IR firm will be able to advise regarding best practices for everything from messaging development and presentation technique to investor targeting and outreach, which will be invaluable in your first year as a public company.
10) Execute on the IR Plan.
As with so many activities, preparation is critical to success in investor relations.
Develop and follow through with an investor engagement strategy to ensure to carve out sufficient time for new targets and not neglecting current investors.
How to ensure that investors clearly understand the Company strategy, growth drivers and market position? In the long run – after 6-9 months the IPO day – the most effective way is through a Perception Study. By periodically taking the investment community’s pulse, the IROs usually can avoid the knowledge gaps and misperceptions that in the end may hurt valuation.
