According to a recent Fortune article, initial public offerings are back. After a long drought, there’s finally starting to be a resurgence, as evidenced by Skype’s IPO announcement on August 9th, and Tesla Motors’ June offering. Several of our clients and prospects are also talking about the possibility of an IPO in the next 18-24 months. Although the IPO process officially starts when the corporation files a registration statement (S-1), preparation for “being public” needs to happen over a one-to-two year period prior to actually going public. This gives the private company plenty of time to adjust and fine-tune its external messaging and communications strategy, as well as prepare its management team to think, act and perform like a public company.
Horn Group has helped many companies through the IPO process over the years, but because it’s been a while since the last IPO window was open, I checked in with longtime investor relations pro, Judith McGarry of Keen Consulting, to find out what has changed.
From a communication perspective, one of the biggest changes is that the role played by the investment bankers and research analysts in helping the pre-IPO company shape, refine and promote their messaging has been greatly minimized, due to a few key reasons:
- Lack of experienced bankers – a combination of the dearth of recent IPOs and talent fleeing the industry after financial scandals
- Global Settlement – 2003 ruling that builds a wall between investment banking and securities research at brokerage firms to avoid conflict of interest
One of the key implications of these changes is that companies now need to rely on internal resources for effective messaging and positioning. Which means that the CMO has a tremendous opportunity to step up and take the lead to fill the void. As soon as the executive team starts to think about an IPO, the CMO should spring into action.
First thing on the pre-IPO checklist is to re-evaluate the company’s messaging and competitive positioning. Is the current messaging high level enough to show vision and direction? Make sure the website and other external facing documents reflect the updated messaging. Do the right industry analysts, customers and partners support your message? Are you compared to the right competitors for investors to correctly fit your company into their models?
Since the SEC looks at 12 months prior to a company filing the S-1 to determine usual and customary patterns of communication, it is also important to establish that pattern 12-18 months prior to an IPO. If you don’t already have communications guidelines in place that are similar to what a public company’s guidelines look like, now is the time to make those updates. Be sure to educate the management team and employees on those new guidelines and expectations for behavior. If the company decides to start issuing quarterly momentum updates, be strategic and thoughtful about using the operating metrics you will want to be measured by when you’re a public company. Finally, if you don’t already have a crisis communications plan in place, this is a great time to do so.