Congratulations! Your company is public. With your IPO, your firm has joined the ranks of Amazon, Apple, Boeing, Facebook, and now Spotify. Now let’s talk about life after the IPO.
All of those long hours you put in at the office paid off. Your advance work contributed to a great market introduction. You developed a strong investment case and an IPO story. You identified your key stakeholders. You created disclosure and guidance strategies (and policies to go along with those). You have a solid IR team in place and an informative website. So, your job is done, right?
You’ll want to grab a venti coffee for this…the IPO is only the beginning. Now the hard work of life after the IPO begins.
Yes! There Really is Life After the IPO.
Don’t get me wrong, going public is an achievement in itself. By all means, take your victory lap. But also realize that having an IPO opens you up to a whole new level of public scrutiny. This isn’t bad news, though.
Now that you have overcome the IPO hurdle, it’s time to follow through on the commitments you made during the IPO. That investment case and IPO story? Now it’s time to execute and deliver against those proof points we developed a few weeks ago (see Part 1).
And, just because you’re listed on the NASDAQ or NYSE doesn’t mean that you can stop telling your story. If anything, you amp up your communications. But where? With whom? How?
You likely just finished a road show that was managed by your investment bankers as part of the IPO process. During that road show, you probably spoke to 10s or 100s of institutional investors. And you likely experienced firsthand, on the day your stock listed, that it’s not uncommon for a new stock (a new issuer) to have a lot of initial volatility in its shareholder base.
In my experience, it takes 9-12 months for a shareholder base to stabilize after an IPO. This means that to grow your shareholder base and build shareholder value, you need to have a good sense of the right investors for your stock and a good solid investor targeting strategy.
Where to start? A few ideas to get you started on your investor targeting strategy:
- Comparable Company Ownership Analysis: Take a hard look at the shareholders of your peer group. Who holds your peers but not you? Might they be a good fit for your stock?
- Industry Investors: Get to know the key institutions, advisors, and funds that invest in your industry. While many investors are generalists, if they’ve put in the time to learn your industry, generally they will look to expand their portfolio in that area.
- Investment Style (with a caveat): Institutional investors are often broadly characterized by investment style (e.g., growth, value, deep value, etc.). Consider where your investment thesis best fits within these styles, but also keep in mind that many portfolios have specific metrics to narrow their focus (e.g., investing only in small-cap firms or companies that meet specific Sustainability metrics, etc.). It pays to do your homework.
Also, remember that many investors will find you on their own. During life after the IPO, your phone will likely ring off the hook with investors of all styles and approaches. It’s important to remain accessible and provide consistent information to all investors, whether they are on your target list or not.
Every shareholder owns a piece of your business and deserves your attention and respect. That said, it’s also important to make time in your schedule to prioritize the investors in your strategy.
Once you have your target list of investors, you’ll want to put together your outreach strategy. This is an important part of making sure that your story is “out there” and your message well understood by current and potential investors, research analysts, and financial media.
It’s also important to develop relationships with investors, analysts, reporters, and others. Many investors will not invest in a company without having met the CEO and CFO at least once.
How can you reach these stakeholders and keep your current investors up-to-date?
1. Conferences: You’ll likely be inundated by opportunities to attend bank/brokerage conferences, association or industry-sponsored conferences, “pay-to-play” conferences, etc. Choose wisely and try to keep a variety of events on your schedule so that you’re not meeting with the same investors over and over.
2. Road Shows: Non-deal road shows (AKA traveling to meet investors without a specific transaction associated with the discussion) are a great way to meet new investors. Often sell side analysts will coordinate these trips for you with their clients. However, with a bit of research and coordination, you can also put together your own trip. In the U.S., major investor hubs include: NYC, Boston, San Francisco, L.A., and Chicago.
3. One-off events: Is your CFO is heading to NYC to speak with ratings agencies? Set up a dinner with sell side analysts or book a meeting with one of your top shareholders too. Invite investor groups or analysts to visit your headquarters and/or major operations locations. Be creative with schedules and try to keep a relatively open door policy. Don’t waste your C-Suite’s time (or your own). But, to the extent that you can, remain accessible and transparent.
By now, you’re so versed in telling your story that building these relationships is the easy part. Relax and trust in your process. The right investors will engage over time.
Expectations and Reality
This is the big one.
You’ve set up your investment thesis, your guidance strategy is in place, you’ve told your corporate narrative so many times that you can tell it in your sleep. What have you really been doing? You’ve been setting expectations—hopefully, reasonable expectations (note: highly encouraged) for your life after the IPO.
Now, it’s time to deliver. Remember, you’re playing in the big leagues now. So, act like it.
As a publicly traded company your quarterly earnings reports will always be closely watched. But your first year and especially, that first quarter, are utterly critical. Why?
Well, for starters, you’ve built a very small reserve of credibility and goodwill with your stakeholders. If you miss expectations out of the gate, that credibility evaporates quickly. Once lost, you will have an uphill battle to rebuild credibility and trust—the only way to rebuild is to meet expectations. And the only way to avoid this pain, is to meet expectations in the first place.
So, make sure you’re keeping tabs on operations and market conditions, fine tune your corporate narrative, and continue to manage expectations appropriately.
Once you’ve made it past that first year of life after the IPO, you can finally trade in that venti coffee for a bottle of champagne and take several victory laps. In fact, if you work with Audacia Strategies to launch your successful IPO, the first bottle of champagne is on us!
The key to a successful life after the IPO can be broken down into four simple steps:
- Set reasonable expectations.
- Tell stakeholders about them.
- Execute on those expectations.
- Tell stakeholders about that.
When your company goes public, you step into the spotlight. Yes, the stakes are higher during life after the IPO. But it’s nothing you can’t handle. You’ve got this!
Photo credit: langstrup_ /_123RF Stock Photo