Whenever the IPO market heats up, there is a lot of talk about the arduous process leading up to the big event — listing day. Anyone who has been along for the IPO ride would agree it is a once-in-a-lifetime experience to watch your stock trade for the first time on a major exchange. What few people talk about is what happens next. After many months of hard work and an exhausting IPO roadshow, executives return to the office to find another mountain to climb — building aftermarket support for your stock. With thousands of publicly traded companies, competition for Wall Street support is fierce, and the more you know about what’s ahead, the better.
1. Mark Your Calendar to Review Initiating Coverage Reports
Twenty-five days after your IPO, covering analysts will begin initiating coverage research reports and entering estimates into financial databases. Before analysts publish their reports, they may contact you to tick and tie their models and assumptions. These calls are tricky because analysts are no longer under a non-disclosure agreement following the listing, and your ability to meet or beat these estimates will in large part define your success as a newly public company. So, be prepared for this possibility and know the rules governing selective disclosure. Once sell-side reports are issued, you’ll see how well the analysts “got” your story and investment thesis and how accurately their models reflect your forecast. Your first earnings call is an ideal time to help analysts with any disconnects in a Reg FD-compliant way.
2. Prepare Carefully the First Quarterly Earnings Announcement
Your first-ever earnings call is a defining moment where first impressions count — new investors and analysts will be paying close attention to how well management is prepared to discuss relevant information and answer tough questions. There is no substitute for preparation, and it starts with developing a schedule that considers an FP&A department that is adjusting to new work streams, Board reviews, and peer group calls. Remember, there is no prize for going first — and most newly public companies benefit from seeing what peers report and how they answer questions. Start with the audience in mind — sell-side analysts who cover more than twenty-five companies and will write better headlines if you convey a few key messages in your earnings release and call.
As a newly public company, by definition, you will be building credibility with the Street. Think carefully about the guidance, metrics, and information you provide. Remember that delivering on the promises you make is more important than the magnitude of the promises, and you can always provide more information but it’s tough to take information away. From an investor’s perspective, information reduces risk, and in a Reg FD world, most companies find they are better served by disclosing more information rather than less. This also builds credibility with investors, limits wrong assumptions, and helps the sell-side construct accurate models.
Finally, take the process seriously and schedule time for a formal rehearsal of the earnings call script and the anticipated Q&A, with a focus on the top tough questions. Declare ‘pencils down’ on the press release to avoid last-minute changes and possible mistakes. Prerecord your prepared remarks so you can spend the final day before the call getting ready to shine in the Q&A session and in follow-up calls with analysts and investors.
3. Create a Marketing Plan
After weeks of meeting with investors on an IPO roadshow, most executives feel like they have met plenty of investors and need to get back to work. That said, the reality for most companies is that you have barely made a dent in marketing your story to the hundreds of investors who should know it.
Every newly public company should create a strategic marketing plan, with the goal of building a diversified base of actively managed institutional investors. That means cementing strong relationships with existing holders while also attracting new investors. On an ongoing basis, companies must cultivate new investor support so that there is always a strong pipeline of educated investors ready to step in and buy shares. It’s important to leverage investment bank-sponsored conferences and non-deal roadshows, but every company should curate its own target list of top buy-side investors to guide the process.
Remember that in an IPO, investors have a ‘drop-dead’ date to buy the stock, and in the aftermarket, there is no deadline. Following the IPO, investors can take their time to get to know your company, follow the stock, meet with you at conferences, see how you perform relative to Street expectations, and then initiate a position. The time span from introduction to action is the main reason you should not put your Wall Street marketing plan on the backburner — you need to build a pipeline of investors who are watching your stock for an appropriate entry point.
While most companies have some sell-side coverage following an IPO, a key objective for any newly public company is to make sure all analysts who cover your sector or similar companies know your story. These analysts need to have an informed opinion when they are asked by their institutional clients about your company. Over time, some of them will likely cover your company, too.
4. Keep a Steady Flow of Meaningful News in Front of Investors and Analysts
Meaningful is the operative word here — ideally, press releases should demonstrate execution against your strategy while educating investors about your business and reinforcing your investment thesis. If you issue trivial press releases, investors will stop reading and miss important news. Public companies should develop a plan for news flow and craft releases with strong quotes that tell your story and appeal to all stakeholders, including investors and the press. IR and PR should collaborate closely to make sure releases work for the intended audience, and at the same time, keep investor and analyst expectations in check. Before you draft or issue a release, think about the questions investors might ask — you may decide to include more information in the release, and otherwise you will be well-prepared when the phone rings.
5. Update Investor Presentation and Communications Materials After the IPO
Your IPO prospectus is a risk document, by design, that outlines all the reasons an investor should not buy your stock. It’s also focused on the past rather than the future, which is what investors care about most. Shortly after your IPO, update your investor communications materials to reflect where the company is headed, how you’ll get there, and how progress can be measured. Post a webcast of your investor presentation to your IR site as soon as possible and create a fact sheet and a welcome video that tells your investment story in less than three minutes. Help prospective investors come up with the learning curve so that management can spend time turning interest into action versus walking investors through the basics of the story over and over again.
6. Catch Up On Critical IR Policies and Protocols
If it was a mad dash to the IPO finish line, make sure you get critical IR policies and procedures in place shortly after your IPO. These include Reg FD disclosure, social media, quiet period, and guidance policies as well as protocols for fielding investor and media inquiries and approving and issuing press releases. Consider holding an IR 101 and disclosure training session for staff members who don’t have much public company experience.
7. Adopt an Integrated Approach to Communications From the Start
Once you’ve gone through the IPO process, there will be no question in your mind that audiences are interconnected and everything you do or say will be seen by all stakeholders. As a newly public company, consider how to evolve your employee communication practices to reflect your new visibility in the public domain. You might have been casual about sharing certain information as a private company, whereas in a public company, loose lips can sink ships. Also, make sure you have a crisis communications plan that anticipates key vulnerabilities now that you’re in the spotlight.
Good luck with your post-IPO journey and have fun.
Moira Conlon is the founder and CEO of Financial Profiles.