Going Public? Tips for Successful IPO Communications

From ExpertMagazine.com

Public Relations
Going Public? Tips for Successful IPO Communications
By Marc Hausman
Oct 10, 2002 - 2:44:00 PM

As the market swings out of the recession the opportunity for your company to tender an Initial Public Offering (IPO) as a capital raising strategy becomes possible once again. Although no one can be certain when this upswing will take place, now is the time to plan for your IPO.

The fact of the matter is, you can maintain business communications at the level the company established before the IPO – as long as you are not artificially stimulating interest in the stock before the registration period (which is guided by certain forward-looking financial restrictions). Your media relations activity must be coordinated with and agreed to by your attorneys and underwriters. The key is to start acting like a public company before you formally start the IPO process. That way, you will build a communications action plan that can carry you through the phases of your IPO.

The benefit of that level of advanced planning is increased awareness of your company and its position in the marketplace with influential audiences (the media, industry analysts and financial analysts).

The more you have in place before the IPO process, the more you can do during the IPO, and the greater the chances of a successful IPO. Here are the phases of an IPO, and what you should keep in mind to ensure that you maximize your company’s awareness.

The Pre-Filing Period

The Pre-Filing Period begins one to two years prior to filing an IPO Registration Statement with the Securities and Exchange Commission (SEC). This IPO Registration Statement (also known as an S-1) includes a preliminary prospectus, or what has come to be called a “Red Herring.”

During this time, it is important to act like you’re already a public company. That is, you’ll need to establish strategic plans, internal controls, financial accounting and reporting, employee incentives and investor relations programs. This is also the time to establish an effective business communications strategy (which can include such disparate activities as media relations, industry analyst relations, financial analyst relations, marketing, advertising and media buying).

Other activities during this period include selecting underwriters (investment bankers), an accounting firm and a law firm. Choose an investment banker with a strong analyst, to facilitate market research after the IPO. Financial analysts have been tarnished recently in the media, making industry analysts that much more important to your communications needs. Still, don’t overlook financial analysts.

This is also the period in which you prepare your draft prospectus or Red Herring and your S-1 Registration Statement. Your business communications strategy must be in place and implemented now, with help from your underwriters, to prevent any SEC problems during the Pre-Filing, Waiting, and Quiet Periods.

Don’t ignore the business communications component here. Having an articulated business communications strategy enables you to create a coherent prospectus and S-1 Registration Statement. It also helps undermine any SEC problems during the Pre-Filing, Waiting, and Quiet Periods.

The Pre-Effective (“Waiting”) Period

The Waiting Period typically runs from the filing of the S-1 to the date it has been declared effective by the SEC. On average, this can be one to three months before the IPO.

During this time, it is important to continue to execute your business communications strategy, with the direction of legal counsel. Again, it’s a fallacy to think that you can’t say anything to anyone during the Waiting Period. In fact, you can maintain the same level of business communication that you established before the Waiting Period, as long as it’s unrelated to the IPO.

Why should your communications strategy, along with an advertising media buying schedule, be prepared so far in advance of a planned IPO? Let’s look at advertising as a simple example. You can’t be seen as inflating your opening day potential if you are executing a media-buying schedule you had planned before writing your S-1 or Red Herring. Likewise, if you have an editorial calendar matrix in place before the filing, as long as it’s not financially focused, your PR activities can follow that matrix.

This is also the time to embark on a “road show” to potential investors and analysts. After the effective date of the S-1, your business communications are limited to only those things included in your Red Herring or draft prospectus. That’s important to know. The limitation on business communications is meant to avoid any charges of “gun-jumping” by the SEC.

Gun-jumping is broadly defined as stimulating interest in the IPO prior to the filing of the registration statement. The SEC can impose sanctions or fines or the indefinite postponement of the IPO if they find you’ve jumped the gun.

The Post-Registration (“Quiet”) Period

The Quiet Period runs from the effective date of the S-1 to as much as 30 days after the IPO.

When the SEC declares the S-1 effective, and IPO shares are priced, a press release on the offer is issued. (Your company’s attorneys usually draft this release, with help from their underwriters.) After the effective date of the S-1, your business communications are limited to only those things included in your final prospectus – again, to help avoid SEC gun-jumping charges.

So what’s your best use of time now? Work behind the scenes. You need to start planning marketing and public relations strategies to be implemented the moment you emerge from the Quiet Period. A spike in the first day of trading is every company’s IPO dream. But to keep that spike from turning into the first nail in your coffin, you need a coherent communications strategy that continues to build your reputation and your credibility among customers, partners and investors, as well as the rest of the audiences that influence the capital markets.

In general, it’s important to learn to balance investors’ short-term and long-term expectations. But overall, you’ll need to work harder on selling investors on your long-term strategy (the business plan). Once you’re out of the Quiet Period, that selling needs to begin in earnest, with an energetic and focused communications program.

Conclusions

So what should you take away from this look at pre-IPO business communications? Overall, laying the groundwork for an IPO well before you file makes the whole process smoother and more successful.

What’s more, the most successful IPOs (as measured by stock price performance) seem to have the following in common:

· Management viewed the IPO as a process and prepared its company accordingly.
· Management executed its strategy in a manner superior to the competition.
· Management effectively communicated the non-financial factors inherent in the company.
· Business communications strategy was developed before IPO process began, and was used to develop subsequent materials.

Start acting like a public company before you begin the process formally. Treat your business communications as a serious first step in the process, and begin communications early enough to carry you through the various phases of the IPO. Make sure your communications people have access to and work cooperatively with your attorneys and underwriters.

Don’t fall into the trap of complete silence during your IPO process. You’ll do yourself and your stock price a great disservice.

Marc Hausman is president and CEO of Strategic Communications Group, a public relations agency serving technology, IT services, software, Internet, and telecommunications companies. Contact Marc at mhausman@gotostrategic.com or 301-408-4500.

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