This article originally appeared in Crunchbase… I was proud to be interviewed for it.
Here at Crunchbase News, we generally write about private companies and wave goodbye soon after they’ve exited to the public markets.
I’ve written before about how to go public and all the costs associated with the transition, so I thought I’d focus this column on two of the first major steps private companies need to pay attention to after hitting the public markets.
Being a public company includes a lot more regulatory headaches. And winning over investors doesn’t end after the IPO.
Capturing investors’ attention
A company’s most important task immediately after going public is to capture institutional investors’ attention, according to Jason Gold, CEO of Unity Investor Strategies, a firm specializing in investor relations.
When preparing for a traditional IPO, companies enlist banks to help arrange investor presentations as part of the IPO roadshow, though it’s with a more limited group of investors.
It’s not the same after the company is public, so companies have to focus on telling their story in a concise, understandable way, according to Gold.
“Once you’re out in public, there’s a perception by new management teams that, ‘Hey all of our information is public, people will do the work, we don’t have to explain things to them,’” Gold said.
That’s not the case, he said. It’s a record year for the IPO market, and with so many companies going public, there’s more competition for investors’ attention. Oftentimes, especially for companies that go public with their founder as CEO, executives don’t realize how busy investors are and how many other stocks those investors are evaluating.
“Really, what you’re trying to do after you go public is generate interest so investors can dig in and do the work,” Gold said.
Corporate leaders are often surprised by how frequently they have to tell their story, he said, and the first year as a public company is one of constant education and meeting with new investors. It could take 10 or 20 meetings to get one investor who takes a serious position, he added.
The nature of an IPO means that often all the investors that come in aren’t necessarily long-term, according to Victoria Sivrais, a partner at the investor relations firm Clermont Partners. So companies need to understand their current investor base and who they want in their shareholder base.
“Managing the very natural transition that happens is very important to not only maintain the floor of your current valuation but to drive your valuation long term,” Sivrais said.
Crafting earnings materials
The next order of business after going public is crafting earnings materials in a way that addresses the key points of the company’s story. A newly public company’s first earnings report is its first “report card” of how it’s progressing toward its story, per Gold.
“It’s the first opportunity for the Street to judge you on your execution,” Sivrais said.
One of the biggest tasks a company has to tackle after its IPO is to get ready for its annual meeting, which is typically nine months after its public market debut, according to Sherry Moreland, president and COO of Mediant, a firm that provides financial and tech services to brokers, banks, corporate issuers and investment advisers. A company’s annual meeting is required by the stock exchanges (the Nasdaq and New York Stock Exchange), and by the law.
Before the annual meetings, companies have to choose a proxy agent, work on their 10-K filing, and finalize what proposals it will put forth, among other things.
The annual meeting and proxy event is really visible, Moreland said, especially for corporate secretaries and general counsel.
“(There’s) lots of minutiae, but if they don’t do a good job of their annual meeting, it’s not going to be perceived well by the public,” she said.
A company must file its paperwork 40 days before the event, post documents online, announce the meeting and conduct a broker search.
While the annual meeting is a big deal, issuers need to engage shareholders long before the meeting, Moreland said, which is why investor relations are so important.
“You can approach it from a purely compliance point of view and you’ll be fine… but I think there’s a much better way to do it and that’s to really think of it as your opportunity of the year to reach out to and engage with your shareholders,” Moreland said. “You never know when you might need their support and buy-in.”
