In this three-part conversation, Sharon Merrill President and Partner Maureen Wolff shares insights on the IPO process from an investor relations perspective. In our final installment, we discuss the next steps a company should take after becoming public.
The Podium: Hello, Maureen. Thank you for joining us again. In today’s discussion, we will focus on the actions companies should take after the initial public offering has priced. We imagine there is much to accomplish.
MW: There certainly is. Hopefully, at this point, a newly public company already has completed the many messaging and infrastructure tasks we discussed in our previous conversations. Those items include having in place a completed IR website, corporate communications policy and training in public company employee protocol, Regulation FD and public speaking. Other items include selecting vendors for various investor relations activities, such as IR website hosting and news distribution.
The Podium: When you put all of those tasks together, the list can seem overwhelming.
MW: Having completed these items before the IPO will allow management to focus on investor relations and corporate communications strategy. That is the reason we consider early preparation so important. If these things are not in place upon pricing, then management is left scrambling. It is as though a marathon has begun, but the runner is still training, trying to catch up to the other competitors.
The Podium: Let’s say the infrastructure is in place. Now what?
MW: Once a company becomes public, management will be expected to communicate regularly with investors. Some companies treat this as an afterthought – and it shows. The best practice, however, is to think about investor relations as an extension of corporate strategy. Be mindful of the entire IR process, just as management is mindful of the execution of its business strategy. Market success requires meticulous IR execution. At this point, management should develop and begin to implement a proactive investor relations program. The program should include investor relations goals as well as the strategies and related IR activities and messaging to achieve those goals.
The Podium: What is involved in developing an IR program? What does the planning process entail?
MW: An ongoing IR program involves a number of interconnected processes, all of which are important to successfully communicating the company’s strategy. We can think of these in terms of three strategic areas. The first area is outward-bound activities, those directed toward investors, sell-side analysts and the media. Management will want to identify new investors and sell-side analysts who are appropriate for the stock, as well as media members and firms most likely to provide quality coverage of the company. Once the appropriate targets are identified, a company should contact them individually, through outbound phone calls and e-mails as well as meetings, to begin an ongoing dialogue about the company’s investment thesis. The ultimate goal of this dialogue is to obtain new investors in the stock, new sell-side analyst coverage and new media coverage that highlights the message management wants to communicate.
The Podium: This is helpful. What would you include in another strategic area?
MW: A second area includes what many of us are most familiar with – the quarterly earnings process. The earnings process includes disclosures such as the 10-Q or 10-K filing, the earnings press release, the earnings conference call script, preparing for potential questions on the call, rehearsing management’s remarks and setting up the logistics for each quarterly call and release. Although the processes should not vary much from quarter to quarter, corporate results do, and that means the earnings cycle can take on a life of its own.
A separate but related third strategic area focuses on messaging, which follows the corporate strategy and business results. It should highlight what management considers its highest priorities while also addressing critical obstacles or issues the company faces. Messaging also needs to address not just what management is focused on, but also what concerns investors have voiced. The best way to assess those concerns in order to address them is through an investor perception audit. Many companies conduct an audit every to 12 to 24 months, in order to make sure the story management is telling is the same story investors are hearing. At the core of the IR messaging should be the investment thesis – in other words, why should an investor be interested in the stock? The investment thesis and overall strategic messaging should form the foundation for the investor presentation, IR website, quarterly communications and other investor materials, which should be refined continuously.
The Podium: Is there anything else IR-related that we should be thinking about after the IPO?
MW: Investor relations is about building strong relationships with your stakeholders and enhancing shareholder value. It is not a turnkey solution that you can plug in and leave alone. It requires attention to details and strategic thought. Along that line, management should continually evaluate its messaging to investors for accuracy and effectiveness. As shareholder activism becomes ever more prevalent, even newly public companies should constantly analyze their defenses against activism. The best defenses, of course, are solid financial and operational performance and proactive stakeholder engagement. And that is what successful IR is all about.
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, perception studies and targeted investor outreach. 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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