6 Questions to Ask Before Your Company Seeks an IPO
Completing a successful IPO is a major milestone in the life of a company. Deciding to embark on the journey to public markets is an exciting time, but it’s essential to ensure that your company is ready. Once the process kicks off, there’s no time to go back and complete important tasks — like meeting with institutional investors and finalizing your company message — that should have been done prior to your organizational meeting. This is when you’ll discuss your offering process with management, counsel, and other advisors.
A false start can significantly damage your company’s credibility on the Street. So how do you know if your company is ready? We’ve compiled a list of six key questions to consider that will help you evaluate whether your company is ready for an IPO.
- Have you met with leading buy-side accounts in your industry? Following the JOBS act, interactions between private companies and the buy side have increased significantly. The old model — meeting with a potential buy-side account during your seven- to ten-day road show and receiving their investment decision during that period — is over. Now, institutions are willing to get to know companies ahead of the IPO road show, so that meeting is no longer introductory. Advance meetings have additional value for your company as well. You may get honest feedback about your story that can help with messaging and can get to know accounts that are interested in your company, which will help you during the allocation process — one of the few times you get to pick your shareholders.
- Have you established relationships with leading sell-side analysts in your space? Establishing meaningful, long-term relationships with sell-side analysts is vital, as they will likely remain your partner throughout the IPO process and during your life as a public company. We recommend building these relationships early to give analysts the time that they need to understand your company and ultimately support your IPO at their firms and to investors. Your relationship with sell-side analysts will also be a significant factor in picking bankers — yet another reason to get to know them.
- Have you met with potential bankers? Selecting the right banker is a critical part of the IPO process. Bankers will advise you on timing, targeted valuation, executing your road show, and much more. But all too often, CEOs of private companies do not fully realize the extent of banks’ involvement and the importance of this relationship. When making your banker selection, consider the banks’ experience in your subsector, valuation methodology, execution strategy, and overall fit for your company. All banks are different and knowing these differences will be helpful in your selection process.
- Is your team in place? Ensure that your team has all the key players you need, like senior-level executives, lawyers, CPAs, and outside consultants, and that they’re prepared to handle the rigorous scrutiny of the public markets. Many investors will pay particular attention to the previous successes of your team members, so hire people who have a history you can highlight and are trained to interact with Wall Street. First meetings are important, so once your team is on board make sure they know your company’s story and message and have any information they may need, like financial statements or future projections. And, don’t forget about your board. Qualified board members can take a while to recruit, and you want to have a strong, dedicated team at the time of your IPO.
- Is your company’s message ready? You need to have your company’s message set before you can start the IPO process. Changing your message during the process is a huge red flag for investors and analysts. S-1 filing is not the time to start thinking about your message — you’ll want to be able to give investors your company’s story and business model early on. Finally, make sure your message is consistently reflected by your spokespeople and in all materials, most notably your investor deck and IR website.
- Have you engaged the proper investor relations support? It is incredibly beneficial to have investor relations support well ahead of being public. Experienced IR professionals can help you accomplish all of the pre-IPO planning tasks talked about above as well as ensure consistency across your messaging and throughout the IPO process. Once you go public, you’ll need to hit the ground running with your IR strategy, so the day after pricing is no time to start developing your program.
Now that you’ve answered these questions, do you think your company is IPO-ready? There’s a lot more that goes into a successful IPO. For advice on the entire process, read our eBook, Westwicke: Insider’s Guide to Going Public, or reach out to start a conversation.
John Woolford is a Managing Director on Westwicke's life sciences team. He has extensive experience in investor relations, as well as IPOs, capital raises, M&A, and other business development activities. He has a BS in microbiology from the University of Maryland at College Park and an MBA from the R.H. Smith School of Business.
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