In this three-part conversation, Sharon Merrill President and Partner Maureen Wolff shares insights on the IPO process from an investor relations perspective. In this second conversation, we discuss preparing for life as a public company after the registration statement has been filed.
The Podium: Hello, Maureen. Thank you for joining us again. In today’s discussion, we will focus on the actions companies should take after they file the registration statement but before they price. What’s a good first step for them?
MW: At this stage, a pre-IPO company has been preparing the registration filing for several months. It is now very important to concentrate on having the investor relations function ready to hit the ground running as soon as the stock prices. One of the first things to focus on is the IR website. It needs to go live on the day of the IPO. There are many cost-effective providers that will host that section of the company’s website.
The Podium: Can’t an internal IT department handle the IR site?
MW: By selecting a service provider that specializes in investor relations websites, you can ensure sure that all the information investors will expect is on your IR site. This includes SEC filings, news releases, quarterly conference calls, conference presentation webcasts and corporate governance materials, among other necessary areas. Most of the information is updated automatically and integrated seamlessly into your site. Using internal resources provides too much risk for human error. You don’t want to find out one morning that you issued a material news release, but it wasn’t uploaded to your IR site because the web manager overslept.
The Podium: Is there anything else we should know about handling the website?
MW: You also want to make sure that your corporate website is in alignment with the information in the registration statement when that document is filed. The information does not have to be a direct match, but the positioning in both documents should not conflict. And most importantly, material information not included in the registration statement should not be on the website.
The Podium: For the employees of many companies getting ready to go public, this is a new experience. How can management educate them on the responsibilities of working for a public company?
MW: It is important for everyone to understand what it’s like to work at a public company. And this is true for all employees. Many times, it’s a major shock from a corporate culture perspective. For example, you may have had a large thermometer in the sales area to let everyone know the status of sales in a month or a quarter. Once the company goes public, that type of information can’t be in the open for visitors to see. Investors would love to get a leg up on their peers by having access to your sales data.
That’s just one example, though. Everyone should be trained on what they can and cannot say to friends, family, customers, etc. and what information should be kept confidential. This is especially important in the age of social media. Employees need to be educated as to what is appropriate and inappropriate regarding work-related social media posts. Your general counsel, IR officer or IR consultant should train employees, and you can role-play with them on various scenarios. You also should develop general responses they can give when they receive requests for any information beyond the company’s standard description. Include in these responses the name of a contact to whom they can refer inquiries, whether that’s the internal IRO, CFO or external IR consultant. There should be one general clearinghouse, if you will, to filter requests for information and make sure these requests go through proper channels.
The Podium: That training is for all employees, correct? Is there specific training executives should obtain, as well?
MW: Absolutely. Often, the experience of being a public company is new for executives, as well. This is especially true for family-run businesses or in cases where the CEO/ founder has been running the company for many years. I would recommend preparing management to interact with the investment community. This may include being clear on the expectations of buy-side investors and sell-side analysts, what and how to communicate on a quarterly basis, specific disclosure rules and SEC enforcement actions, appropriate use of social media and how to interact with members of the media.
The Podium: Speaking of the media, that’s an area that is foreign territory for a lot of us. How do you recommend we deal with that?
MW: Companies should make sure they have a communications policy in place. Who is authorized to speak to the media? Is there a primary contact who receives inquiries and then sends them to the CEO or CFO? What types of information will you comment on? Do you give interviews? When? All of this should be ironed out in advance, so that you aren’t caught flatfooted when the media come calling.
The Podium: Do you recommend presentation or media training for those executives who will be dealing with the media?
MW: I would not limit presentation training to preparing for the media. Now is the time to train executives to be effective communicators, before they go on the IPO roadshow, because they will need to have excellent communication skills in order to market the company’s story to investors. Management will have spent considerable time developing the company’s positioning for the registration statement, so they’ll know what the messaging is. However, that doesn’t necessarily mean they can present it effectively. Unfortunately, most presenters spend a lot more time creating the PowerPoint presentation than they do preparing to actually deliver the message. There’s a lot of research showing how we present information communicates more than the information itself. This training is critical to the success of the IPO and should include preparing the team for Q&A with investors, sell-side analysts and the media. Spend the time to have executives trained now because they will be giving hundreds of investor presentations – and fielding many more phone inquiries – once the company is public.
The Podium: How do we decide what information to provide on an ongoing basis?
MW: Determining your financial metrics is critically important. This should be based on how management wants the company to be evaluated by the investment community on an ongoing basis. One way to begin to determine your financial metrics is to look at other companies in the same space to see the type of information investors are accustomed to receiving from peers. Management will need to be very comfortable with these metrics, because they’ll need to communicate them in good times and bad. Communicating clear, concise and consistent information is critical once you are a public company.
The Podium: Thank you, Maureen. We look forward to speaking with you again next time, when we’ll discuss the next steps to take once a company is public.
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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