Five Ways to Ensure IPO Preparedness Amidst an Uncertain Market

In June 2021, Edelman announced the findings of a special report, "Going Public: Evolving Investor Expectations for New Issuers,” which uncovered institutional investor perceptions on the IPO and SPAC markets and examined the factors that influence investment decisions. At that time, our survey respondents expected IPO/SPAC activity to moderate with 90% of institutional investors predicting the IPO and SPAC surge would end within the next year. 

After a year of record global IPO activity in 2021, this expectation has come to fruition. According to Renaissance Capital, Q1 2022 marked the slowest first quarter for US IPOs in six years as stock market volatility, rising inflation, interest rate hikes, supply chain pressure, and geopolitical uncertainty fuel investor concerns. This has left companies who have begun the IPO process in limbo as they await to launch their offerings in improved market conditions. 

Although many IPO launches may be stuck in a holding pattern, we have outlined five ways issuers can continue to prepare for public company life post-transaction:

1. Refine core materials to reflect recent developments—The S-1 and roadshow presentation are core to the investment community’s understanding of an issuer’s business, financial performance, and growth prospects. With the IPO market essentially paused, this has caused many issuers’ financials and recent business developments to go stale as they await to launch their offering. Issuers should ensure they are rolling forward updated financial performance and relevant business updates into the S-1 and roadshow presentation. Keeping these materials up to date will best position issuers to take advantage of any windows of opportunity that may arise. Closely track public peers to understand pertinent topics and questions that are top of mind for investors and refine content as needed to address market concerns and questions. 
2. Keep the analyst community engaged—The sell-side will be critical in shaping a company’s perception with Wall Street. When a transaction timeline extends, there can be big lulls between analyst day and modeling session and launch, creating large gaps in communication with the sell-side. It is important to find thoughtful ways to keep analysts engaged. Use the extra time to ensure analysts understand the company’s investment thesis and are up to speed on material updates on the business. Identify opportunities to collect and address follow-up questions and concerns. Depending on timing, issuers can also host mini earnings calls with the analysts to keep them apprised of quarterly performance, which will inform their models. This can also serve as practice for future public earnings calls. Issuers should also consider hosting group meetings and presentations to introduce analysts to additional members of the senior management team who lead critical business functions such as technology, marketing, or specific business segments. This helps showcase the depth of the leadership bench and allows analysts to dig a layer deeper into the business and better understand the story.  
3. Continue to build interest with investors—Testing the waters (TTW) meetings enable issuers to educate investors on their business, growth strategy, and historical financials and get a sense of institutional interest in a potential IPO transaction prior to roadshow launch. TTWs are great opportunities to drum up interest for launch as well as good practice for management ahead of the roadshow. Issuers should align with underwriters on whether they should consider arranging additional TTWs with high-quality, long-term investors. 
4. Build the investor relations function—Having an established investor relations function is vital for post-transaction. Continue to build core materials necessary for a successful IR function, including the IR website and investor conference/marketing calendar. Develop and establish the company’s earnings process, including workback plan and document checklist and line up key vendors (i.e., teleconferencing, webcasting, and newswire services). Conduct peer benchmarking and establish a clear financial reporting and guidance policy post-transaction. Issuers should also consider drafting samples and templates of key earnings documents such as the release and script and host a mock earnings call with management. 
5. Establish a robust employee engagement and education plan—There are many companies who are in the midst of the IPO process but have not yet publicly flipped their S-1 filing, so their intentions to IPO are not widely known across the organization. One of the most critical audiences for a potential IPO is employees, and it is important that they understand the strategic rationale for going public, potential impacts to the business, and potential changes to their day-to-day work. With additional time to plan, issuers should ensure they have established a robust employee communications and engagement plan that keeps employees informed and empowered at all touchpoints leading up to a potential Listing Day. Create and implement education and training around important topics, including quiet period, insider trading, regulation fair disclosure (FD), and employee stock compensation/options. 

It is critical for issuers to think ahead and keep their S-1 and roadshow materials up to date and take the necessary steps to set up their IR function and public company employee education programs to ensure they are able to take advantage of any IPO market openings. 

Nicole Briguet is Vice President, Financial Communications & Capital Markets and Ted McHugh is Managing Director and U.S. Head of Investor Relations, Financial Communications & Capital Markets.