As part of our ongoing six-part webinar / podcast series, we offering these “collateral questions” to review. To listen to the actual webinars – or download the podcast files – please CLICK HERE to learn from our subject matter expert Bernie Kilkelly.
Q: What changes should you expect after going public?
Going public is one of the crowning achievements for a company and since a tremendous amount of work goes into preparing for the IPO, including a demanding road show, it would be natural to think that you’ve reached the finish line and are ready to take a rest. In reality, the IPO is just the start of the ultra-marathon that is the life of a public company, and it is critically important to plan ahead of time and prepare for the post-IPO period. Ideally, the investor relations function should be staffed either with an internal investor relations officer or outsourced by working with a trusted IR firm.
There should be set policies and procedures in place to designate appropriate spokespeople for the company, with the internal IRO or a senior person from your external firm serving as the key spokesperson. While the CEO and CFO should be available and accessible when needed, it is not advisable for them to serve as the primary point of contact for analysts and investors, since they have many other responsibilities and demands on their time.
How should you prepare your entire company for the post-IPO period, especially with regards to disclosure requirements like Reg FD?
It is critical to have a disclosure policy in place before the IPO and this policy should be updated after the IPO to reflect the new requirements that the company faces. In particular, the policy should spell out in detail the executives who are permitted to speak to analysts, investors and the media, and the procedures that other executives should follow if they are contacted by an analyst, investor or the media. The designated spokespeople should of course have a full understanding of Reg FD and should be equipped with talking points and a list of potential questions and scripted answers to use when talking with or meeting with analysts and investors. For media interviews, it is especially important to be aware of periods before and after the IPO where the company is prohibited from discussing the offering.
After the IPO, the company’s disclosure policy should include a quiet period to limit communications with analysts and investors during the time after the quarter closes and prior to the release of earnings. This quiet period is critical to avoid inadvertent violations of Reg FD disclosure regulations. According to a NIRI survey released in February, 85% of public companies have a quiet period before the release of earnings. The company should also put in place a blackout period during which employees and directors are restricted from trading the company’s shares after the close of the quarter and through the release of earnings. According to NIRI, 99% of companies have trading blackouts.
Bernie Kilkelly is a senior investor relations practitioner with over 25 years of experience in designing and running successful IR programs to help companies build shareholder value. His background includes serving as head of investor relations for three public companies in the financial services sector, including Delphi Financial Group, Inc. from 2001 until its acquisition in 2012 by Tokio Marine Group at a 76% premium to its stock price. In addition to serving as a corporate investor relations officer, Mr. Kilkelly has worked at leading investor relations and financial/public relations agencies in New York, including Morgen-Walke Associates, Makovsky & Co. and Robinson Lerer & Montgomery. Mr. Kilkelly is a recognized leader in the investor relations community and has served as a director of the New York Chapter of the National Investor Relations Institute (NIRI) since 2007. He was NIRI-NY Chapter President in 2012 and is currently serving as Vice President-Communications, responsible for the chapter’s website, newsletter and social media.
What should be the role of the CEO and CFO in the IR program after the IPO?
Senior management of the company, in particular the CEO and CFO, are the face of the company during its IPO road show. This is always the case for a small cap company and even more so when the CEO is a founder of the company. Once the IPO is completed, it is important for senior management to transition away from the day to day contact for analysts and investors, most importantly so they can focus on running the company. The CEO and CFO should participate in investor conferences, non-deal roadshows and 1-on-1 meetings with key analysts and investors, but as much as possible the targeting and introductory conversations regarding the company should be handled by the designated IR point person.
What are the most critical elements of an IR program after the IPO?
Once the IPO is done it is crucial for a newly public company to maintain strong relationships with your new shareholders and have an active program in place to target and attract new shareholders. The company will want to participate in appropriate investor conferences and do non-deal roadshows to get out and meet with current shareholders and investor prospects. There is a 25 day quiet period after the completion of the IPO and while management may be eager to get out and meet with new shareholders and prospects, it is not necessary to do meetings immediately after the end of this period unless you have something interesting to talk about that wasn’t discussed on the IPO road show.
This will also enable the company to spend more time preparing for the important first quarterly earnings release and conference call after the IPO. It is also crucial to have a robust investor relations website that is continually updated as new materials become available.
What are the pros and cons of having an internal IRO vs. outsourcing with an IR firm?
The investor relations function is critical to making sure that the company understands what analysts and investors are thinking and to manage expectations around earnings and other metrics. For many smaller companies, budget considerations make it more difficult to hire a senior executive to handle these responsibilities in-house. [We are a little biased, of course, but] An attractive alternative is to outsource some or all of these activities by working with a trusted investor relations agency. Agencies have established contacts in the institutional investor community and with retail investor channels that will help in your investor targeting efforts. The agency will also have experience in helping companies prepare for investor conferences and putting together non-deal roadshows.
An outside agency will provide objectivity that is sometimes difficult for an internal staffer to have. It will also enable you to have the expertise of a senior person for considerably less than the cost of a full-time senior IRO.
What should the newly public company look for in selecting an IR firm?
One of the key factors in selecting an IR firm is to look at the amount of senior executive time that will be spent on your account. A larger agency will often assign a team to your account that includes junior staffers, who may be bright and eager but are nevertheless lacking in experience. It is critical when selecting an agency to find out who will be handling your account and how much access you will have to senior experienced staff. Smaller boutique agencies are also able to provide deep expertise in targeted industries.