INSIGHT

The secret to a successful IPO

Brief

Stringent communication is one of the most important factors to a succesful public listing

May 28th 2021

2 min read

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Jonathan Szpirt

Managing Director

KEY TAKEAWAYS

  • Start early. Start your preparation for your communications effort early. A lot of work needs to be done well in advance of your IPO. The IPO itself will be extremely demanding for you and your team and you don’t want to do your communications planning last minute. 
  • Find a communications partner. You should only work with someone you trust, who has relevant IPO experience and who gives you peace of mind so you dare to let them handle your communication. 
  • Practice pays off. The best-performing corporations on the stock exchange are also often those with the best investor communications. 
  • Prioritize communication. Apart from being able to show great economic results, communication with the market is one of the most important aspects in defining one’s success on the stock market.

Going public on the stock exchange is one of the most important milestones for a company and therefore requires an extremely focused effort. However, investor communications is a new discipline to many companies planning a public listing.

Communications and media management are vital in ensuring a successful initial public offering (IPO). Some listings don’t go as planned and stock market psychology plays a pivotal role in the listing. Market psychology is influenced by several factors including the valuation, analysts, timing and not least how and what a company communicates to the market. The media and the financial analysts play a fundamental role in this, and it is therefore essential to be able to understand and navigate that landscape.

This is especially true for small and medium-sized enterprises (SME’s), which make out the majority of the companies that decide to go on the stock exchange. Most of these companies aren’t well-known by the public or the investors. If the value and potential of the company, its products and its clients is widely unknown by the investors, this will negatively impact the listing, even if there is a solid investment case.

Therefore, it is crucial that the company’s story, potential and plans are unfolded in the media in advance of the IPO in order to get the opportunity to ride on the wave of interest that comes along with media coverage. Ultimately, the attention from the investors that these media stories bring along will also usually materialize into a more attractive valuation and ongoing interest in the stock afterwards.

START EARLY

Consequently, the companies that start preparing their communications effort well in advance of the actual stock exchange listing also have a higher likelihood of success. We usually advise our clients to start their communications effort with us half a year before the IPO so we have the time to prepare a detailed and executable communications strategy and the necessary activities.

Executing on the communications plan in due time also has the benefit of letting the company’s spokespersons practice their communication to the market actively, making them more comfortable to talk to the media, while also making sure that both the professional, institutional and private investors are targeted on a continuous basis with relevant messages.

It is also important to be aware that communicating with investors and the media is a very different discipline than regular communication with clients, partners and so forth. When representing a company that is now suddenly monitored by the public, one has to be prepared to defend the company’s decisions more extensively, and answer critical questions from the ‘outside’, while also being under much more scrutiny than before. In this context, it is also almost inevitable that critical press attention won’t occur sooner or later.

A NEW COMMUNICATIVE REALITY

The CEO will often be the one assuming the role of the primary spokesperson once a SME has been listed on the stock exchange, and consequently the role of the CEO is one that changes drastically communication-wise, as a result of the company going public.

Yet, this does not only apply in the period leading up to the IPO but even more so when a company has had its debut on the stock exchange. In fact, once the company has been listed, it now also has to live up to a vast number of strict rules regarding its communication to the public. These rules state that the company must communicate in a timely manner about everything that could possibly influence the stock price of the company. No matter if the news are good or bad.

The IPO is thereby just the starting point for a new communicative reality where stringent communication is necessary for maintaining and developing the share price in the long run. This is why a proper and ongoing investor relations effort is very important. Going forward, you need a clear investor policy and to continuously work on creating and maintaining positive relationships with investors and analysts.

Want to learn more? Contact our specialists.

At Szpirt & Company we have extensive expertise and experience in financial communication and have been involved in preparing and handling almost ten Nasdaq IPO’s in 2020 and 2021.

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