So You Just Completed Your IPO: Here’s What to Do Next

Investments

Holding an initial public offering is a major step in a company’s life, and it takes several different kinds of experts to guide one through. However, while there are plenty of sources available to help with the planning and preparations necessary before the IPO, many company founders are left at a loss afterward.

While the IPO process may technically be over, there are still several things to keep in mind and continue to work on afterward. First, it’s important to realize that your communications with investors shouldn’t stop just because the IPO is over.

“Investors want to be educated and nurtured. It’s a process,” explains Alyssa Barry, principal and co-founder of IRLabs. “The infamous quote, ‘Build it, and they will come,’ stands true, but the key word is ‘build.’ You need the team to play; the fans need to be served; the cheerleaders need to hype the crowd; you must nurture fan loyalty; you need to get creative; and the team needs to perform to keep the fans coming back more. Just replace the word ‘fans’ with ‘investors.’”

Here’s what else you need to do after your company just went public.

Post-IPO stabilization and insider lockup

The first step after a company goes public is actually taken by the underwriter that helped guide its shares onto the market. The first few days of trading are critical for newly public companies and often marked by extreme volatility.

As a result, underwriters will take steps to stabilize the new stock during the 25 days following its IPO. For example, the underwriter will work on attracting recommendations from analysts and help create a market for the newly issued shares. More directly, the underwriter will provide additional stabilization support by purchasing some of the new shares at the offering price or below to help settle order imbalances in the new stock.

As part of the stabilization process, most newly issued stocks also have lock-up periods following their IPO. During these periods, company insiders and early investors may not sell any of their shares. Post-IPO lockups are aimed at allowing the new stock to settle without additional selling pressure from insiders. In most cases, these post-IPO lockups last anywhere between 90 to 180 days. The length of the lockup would have been set during the registration process for the IPO.

Attracting analyst coverage

After the 25-day quiet period, the market transitions from depending on official and corporate disclosures to relying on other sources for information about the company. As a result, companies should waste no time before speaking with analysts to secure coverage of their stock.

It can help immensely to have a communications or investor-relations specialist pair your company with and introduce you to appropriate financial analysts who may be willing to cover your stock because not all analysts cover every stock. In addition to coordinating media interviews, these specialists should also know how to talk to analysts or investment bankers.

“Investor-relations professionals can help you navigate the capital markets, especially if you’re a founder who’s never been in them before,” Barry added. “Find someone who can connect you with investors, help you with your communications, writing, press release dissemination, roadshows and events. They’ll make sure that the messaging is on point.”

The best-case scenario is to start with financial analysts who already cover companies similar to yours, not only in sector and industry but also in size and other factors. In some cases, it might be a good idea to start by focusing on junior analysts rather than senior ones, who may be more focused on large-cap or mega-cap companies. 

Additionally, having certain estimates and documents in place can set the barrier to entry for covering your stock exceptionally low, making it easier for analysts to start covering your stock.

For example, companies that establish a clear strategy and three-to-five-year revenue plan set the stage for analyst coverage right out of the gate. That plan should include guidance and other goals that are easy for your company to meet and beat. 

Be transparent about profitability

Additionally, it’s important for corporate leadership to realize that in general, investors will no longer tolerate a years-long period of unprofitability following an IPO, at least not without transparency into when profitability will be achieved. Analyst David Nelson, chief strategist at Belpointe, highlights the importance of clearly defining the company’s path to profitability and setting a realistic timeline to achieve that goal.

“The days of taking a company public and going years with little or no earnings are over,” he explained in an email. “This is especially true in a world where the risk-free rate of return is an acceptable alternative for many investors.”

Nelson also emphasized the need to “under-promise and over-deliver.”

“Those are two phrases that should be on page 1 of the CEO instruction manual. Wall Street is very unforgiving of missed expectations,” he said. “If you manage those expectations and exceed them, you’ll find unwavering support from the institutional community.”

It’s important to realize that attracting analyst coverage is a gradual process that depends on building relationships with those analysts. You might not secure coverage right out of the gate. However, if you keep the lines of communication open with analysts who might cover your stock, you may receive attention down the road.

That 25-day post-IPO period is a critical time for building relationships with analysts and encouraging them to initiate coverage after the quiet period. A good rule of thumb is to try to get at least five analysts covering your stock so that there is an array of different opinions and to help manage any extreme outlier estimates one or two analysts may share.

Investor relations strategies

In addition to seeking analyst coverage, you should also quickly establish operations in two other critical spheres: investor relations (IR) and public relations (PR). All communication types are critical out of the gate after the IPO because your company may quickly lose the attention of investors and the general public in the weeks afterward — unless you have effective strategies to help keep your company and its stock in the spotlight.

IR starts with identifying family offices and other institutional investors that may be interested in investing in your company. Once that list is established, the IR team can reach out and begin to build relationships with those investors, focusing on attracting investments.

A great place to start building that list is with investors who met with your executive team during the IPO roadshows but didn’t buy any shares in the IPO. Clearly, they were interested enough to meet with you, but they just might need a bit more information or analysis before pulling the trigger on buying shares.

Of course, IR officers should also maintain communications and relationships with investors who did buy shares to keep them interested and engaged so that they don’t decide to dump the stock. An effective IR strategy also involves clear, consistent messaging and corporate materials that share the company’s story and resonate with investors in general.

Jennifer K. Zimmons, Ph.D. MBA, president of Zimmons International Communications, Inc., specializes in working with the portfolio companies of family offices and private equity firms. She advises CEOs to address shareholders directly in the days or weeks following their IPO.

“An important gesture is for CEOs to write a simple and straightforward ‘letter to shareholders’ reaffirming the corporate vision, detailing near-term milestones, and expressing gratitude to stakeholders,” she said. “Existing investors will appreciate being acknowledged, and potential shareholders will have a better sense for how it would be if they joined the register.”

If there’s enough interest, it might make sense to hold an investor day soon after the post-IPO quiet period.

Public relations outreach

PR is like the flip side of a coin with IR on the other side because instead of investors, it focuses on the general public — and the media outlets you can use to reach them. 

For example, a variety of different PR “experientials” like conferences, roadshows, boutique investor events, webinars and other techniques can go a long way toward placing your company in front of everyone who may be interested in your company. 

Such events can generate lots of fresh, unique opportunities for your company to be featured in the media while providing plenty of chances for networking and making connections that can help push it forward. In fact, your PR team may already have the connections you need to secure an invite to the most important conferences for your business.

Meanwhile, a solid PR strategy also involves the regular publishing of articles, social media posts, and other media placements where the company can attract attention. Chris Tyson, executive vice president of MZ North America, highlights the critical roles company management plays in public relations.

“On the public relations side, the management team supports outreach with thought leadership pieces and interviews in select industry and investor media outlets,” he said in an email. “Positioning the team in the media as experts in the industry builds a catalog of resources that demonstrates your ability to execute business growth and build shareholder value.”

Additionally, a PR-specialist firm should have a team of content creators standing by to create content that will highlight your company and its products or services. Your PR team will ensure that your company trends with any important or big stories that affect your business.

However, one thing many entrepreneurs or startup founders might not realize is that not all PR firms have extensive experience in working with publicly traded companies. In fact, publicly traded companies, especially newly public ones, can’t afford not to have PR experts who aren’t experienced and knowledgeable about working in the public markets.

Publicly traded companies have many additional needs that must be met, including extra legalities, SEC filing requirements, quiet periods when no corporate commentary is allowed, embargoes, and other regulations. Failure to handle these needs correctly and abide by all rules and regulations can cost public companies their status or increase their chances of being fined or audited.

In fact, if you haven’t already begun working with a PR team that focuses on publicly traded companies, this may be the time to look for a specialist firm to either transition to or to layer on top of your current PR experts.

Personal and employee wealth management

Aside from all of these critical corporate activities, many startup founders have questions about monetizing their stake in the company they may have spent the last several years toiling hard to build. Ironically, even though an IPO may exponentially increase your wealth on paper, it may create personal liquidity issues because it temporarily locks up a significant portion of your net worth.

Thus, you’ll need to keep some of these challenges in mind as you transition from the role of executive in a privately held company to one of a publicly held firm. Unfortunately, the specifics of private wealth management go beyond the scope of this article, but here is a quick list of some things to keep in mind.

  • Create a plan to sell or buy more of your company’s stock and establish your 10b5-1 preset trading plan during the 25-day quiet period so that it’s ready to go when your lockup is over.
  • Plan ahead on exercising any stock options you may be entitled to.
  • Beware of concentration risk, which occurs when you have an outsized percentage of your personal wealth tied up in your company and take steps to diversify your net worth.
  • If applicable, keep in mind any minimum amounts of stock you might be required to hold as a key executive in your company.

Due to the nature of these challenges, it might be a good idea to work with a financial adviser who has expertise in guiding executives of newly public companies amid this major transition.

This is just the beginning

Ultimately, taking your current company public is just the tip of the iceberg — and the beginning of a story that should continue for many years or decades to come if you have the appropriate team and leadership in place. Once a company goes public, there are certain regulations it must follow, and if it fails to do so, it could face enormous legal and regulatory problems.

However, with the right communication strategies in place after your IPO (if not before as well), your company can thrive in the public sphere.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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