The IPO market is hot right now. According to StockAnalysis.com, there were 577 IPOs on the US Stock Market in the first half of 2021, compared to 480 in the entirety of 2020 and only 232 in 2019. Q1 also saw a significant increase in companies coming to the public markets taking non-traditional paths, such as direct listings and special purpose acquisition (SPAC) mergers. At the time of writing in July 2021, SPACInsider reports that 384 SPAC IPO transactions have generated over $116 billion in gross proceeds already this year, accounting for more than 2020's total global activity ($83 billion).
With strong investor interest and surging public company valuations, it’s a good time to go public. That said, with more opportunities to complete the IPO journey means more competition, and many companies are pulling out all the stops to impress investors. However, companies often overlook the need to be well prepared when they start trading.
Fortunately, no matter the size of your company, there are strategies you can apply to maintain positive momentum post-IPO. The work doesn't end once the hype dies down and your stock stabilizes — that's when the real work begins.
If you want to improve your company's chance of earning a strong public market valuation, avoid these mistakes and consider adopting one or more of these approaches.
It’s not always easy to keep up the communication momentum you built during your IPO process, however, it is a key expectation of public companies. A compelling equity story is one of the reasons you secured investors in the first place, but too often we see executives neglect to perform regular proactive outreach after a public debut. This can be a costly mistake as it can impede business growth and increase your cost of capital.
Focus on marketing awareness and positioning to investors using clear and concise storytelling. Continue to craft your narrative and articulate the company's long-term vision to not only current shareholders but also prospective investors. Explain how their investment in your company will help support strategic growth objectives, and set realistic metrics that stakeholders can understand and measure performance against. This will help manage expectations appropriately to ensure that the stock doesn't price in unrealistic expectations. Executives who commit to transparent communication — during the good times and the bad — position their company for the best success long-term.
Your company is now one in a universe of over 40,000 public companies. That means even more competition to attract and retain the right investors for your particular business. Even if you are technology’s next unicorn, filing and listing do not automatically imply that investors that align with your long-term strategy and vision will find you.
The most successful strategy public companies apply when raising capital is developing and executing an active investor relations program. When crafting your strategy, take factors into consideration such as your company’s life cycle, size, and valuation to identify target investors, and focus on having a dedicated investor relations professional or team actively develop strong relationships with current and potential shareholders. Ultimately, IR is a relationship management function. The stronger your relationships are, the more likely your investors will be willing to maintain their positions and it’ll be harder to “break up with you”. Additionally, strong investor targeting efforts can help you form relationships with the right investors.
Most importantly, you should ensure you’re tracking each and every investor interaction so you can gauge the strength of the relationships you’re building. It takes commitment and precision, but companies that implement a proactive investor targeting framework to focus on growing relationships are better positioned to sustain business momentum post-IPO.
After surveying hundreds of buy-side professionals, Irwin found that 73 percent of investors prefer frequent communications with the companies they invest in. But if you don't know who your investors are, how are you going to engage them post-IPO?
Like so many industries, in capital markets, data is power and companies must use it to know who their audience is. Irwin has found that current shareholders are 9x more likely to increase their position than to acquire new shareholders. For this reason, it's critical that executives prioritize understanding and engaging with their entire shareholder base and understand how their story aligns with the investor’s specific investment style and preferences. This can include major reported institutional shareholders as well as non-reporting investors such as smaller hedge funds, family offices and individual investors.
Today, IROs have access to accurate and timely ownership insights that can help you monitor and identify high-value investors. For example, suppose you want to understand what it is about your company that attracted a particular investor post-IPO. In that case, you can use Irwin's solution to uncover investor styles and dig deeper to find out why they own your stock and how that compares to your peer group to encourage them to increase their position.
Executives, IR teams and their advisors should use data and insights to understand the shareholder base, proactively target current and prospective investors, and maintain an open dialogue with them to build trust and rapport. Transparency will create confidence in you and your business, so be honest and clear when communicating your unique story.
No matter what avenue you use to enter the public markets, your company can thrive if you follow these strategies. Creating a cohesive communications plan, developing a strong relationship-building strategy, and monitoring shareholders can help you assess risks and opportunities, lower your cost of capital and significantly improve your company’s success as a public company.