An IPO is a crowning achievement for a company and its management, the fruit of much hard work. But being a public company can present challenges they might never have faced before. We have created some guidelines – called The Ten Commandments of Investor Relations for Newly Public Companies – to help them thrive.
1. Thou Shall Know Thy Shareholders
As a private company you could count your shareholders on one hand. Now you have hundreds, including individuals, index compilers, mutual funds and hedge funds. Some will be long-term holders; others will come and go quickly. Knowing what makes investors tick will help you build support for your business strategy and valuation.
2. Thou Shall Prepare for Thy Earnings Announcements
Your quarterly earnings call is an important event. You’re not only reporting the financial results but showing investors the depth of your management team, your command of financial details and your confidence about the business outlook. How you handle these issues is just as important as reporting the numbers.
3. Thou Shall Not Covet Thy Neighbor’s P/E Multiple
It is natural to yearn for the valuation of more established companies in your sector. Building and sustaining a valuation takes time and persistence. Create an investor relations plan and stick to it.
4. Thou Shall Not Attack Short-Sellers
Short-sellers are a fact of life in the public equity markets. The best defenses against them are solid facts, prompt disclosure, good communication with shareholders – and consistent financial performance.
5. Thou Shall Command Thy Legions to Speak with One Voice
Communication is most effective when the management team is on the same page. Investors will watch what your team members say, and each one is a potential source of material information. So coordinate executives’ public appearances and set rules for handling sensitive issues.
6. Thou Shall Set Watchmen Upon the Internet
As a public company, you will attract attention from stock-research houses, investment advisers and an assortment of industry analysts, bloggers, pundits and commentators. You will want to know what they’re saying and how it might affect your stock price – and your business.
7. Thou Shall Not Ignore the Press
What the news media say about your company and its management can have a big impact on your customers, employees and shareholders. It pays to build relationships with them early, before they knock on your door.
8. Thou Shall Remove the Pen from Thy Lawyers
Your attorneys have an important role to ensure your compliance with securities laws. But clear, concise writing that reflects your strategic messages isn’t their strength. So definitely let them review your public communications – such as press releases, speeches and investor presentations – but leave the writing to professionals.
9. Thou Shall Not Bury Important News in Thy SEC Filings
Meeting SEC requirements for disclosure is important, but consider a press release for really significant news. It’s where you can give context, especially if you’re announcing bad news.
10. Thou Shall Have Useful Metrics
Help investors understand your business and define the terms for your success by providing clear metrics, especially if you’re part of a new industry with few established performance measures. Just remember that once you’ve set the metrics, you’ll have to live up to them.
To download a pdf of these guidelines, please click here.