Post IPO Considerations

As part of the IPO process, a company should have in place the necessary systems and processes needed to operate effectively post-IPO. Considerable thought and ongoing effort needs to be allocated to making sure initial investors are well-informed and new investors are attracted to your company. The principal considerations we will discuss in this CEO Topic are continued company performance, meeting reporting requirements and effective communications with your current and potential shareholders. This is an area where many newly public companies fall down after going through the exhausting IPO experience.

A company that has a successful initial public offering is one with a strong management team that has shown and can demonstrate sustained or increasing growth in revenue and earnings. There is no substitute for strong financial performance and those companies able to produce results according to expectations will be rewarded in the public markets. Financial integrity and timely disclosure of material information, whether favorable or unfavorable are the keys to long term success. We have found that thoughtful candor with investors is a key to building the trust and confidence necessary to create a long term shareholder base.

Once your company is public, it is bound by the SEC to fulfill basic reporting requirements including 10Q, 10K, 8K and Proxy or Information Statements. International listings have similar regulatory requirements. Material information must be kept confidential within the company, until it is released to the public. Attorneys and accountants are critical advisors to your financial staff in preparing the appropriate materials. Timeliness and accuracy are essential.

An extra word of caution should be noted regarding making forecasts, projections or similar disclosures in forward looking statements. More and more companies are focusing on providing guidance on an annual basis rather than on a quarterly one. It is very important to ensure that the requirements for safe harbor provisions are appropriately met.

Ongoing communications to investors and those influencing investors (analysts, consultants and journalists) are a critical function within a public company. It is important to choose an individual within your firm to handle shareholder relations. Although not a requirement in all cases, we recommend retaining an external advisor (a PR or IR firm) to support your efforts. Investor relations should ensure responsiveness, accuracy and consistency in all messaging and information provided to shareholders and other external constituencies. A well-informed investor group can better understand changes in business circumstances and are more likely to remain investors over the longer term.

The goal of investor relations is to inform those who are already shareholders but also those who might become investors. Proactive research as to who invests in similar companies and outreach to those individuals can increase exposure for your firm. Similarly, it is extremely important to become acquainted with a broader range of the most influential analysts and journalists covering your business, who can be immensely helpful in building brand recognition and attracting new investors.

Operating as a public company carries many additional obligations. Along with close attention to solid business operations and observing regulations and required disclosure made even more rigorous by Sarbanes Oxley, management needs to allocate a reasonable amount of time to thoughtful and ongoing communication to your key current and potential constituencies. We have found this investment of time and resources a valuable contribution to maintaining continued public shareholder enthusiasm reflected in a share appreciation and active trading of securities. For additional thoughts and advice, feel free to contact your GA team.