Accelerator Strategies Inc. 
Post IPO Strategies
Post-Public Listing – Now the Work Begins

 

  The IPO is closed and the stock is trading.  Hopefully it’s experienced a run up post-listing making the underwriters' top retail clients -- who were given preferential allocations of shares -- happy for their instant gains and the investment bankers celebrating quick profits from share over-allotments.

 
Management and staff with shares and stock options are euphoric, spending paper gains in their minds (theoretical, since most will be subject to a long lock-up period).  Trading volume is robust as institutions come in and out of the stock.  Life is good. 

   But a waning of post-listing euphoria may surprise even the most seasoned CEO or CFO.  

Here are some strategies to consider in managing a post-IPO small cap.

1  Preserve IPO Cash Like It’s Your Last

   Proceeds from a public listing will bulk up the balance sheet.  Much of it has been committed to fund growth-related capex, the opening of new markets or acquisitions.  But for the first time since its founding, the company may have some discretionary resources.  It’s at this point that so many freshly minted public companies take a wrong turn, spending to fill old wish lists.  New office premises, expanded head count, ambitious ad campaigns …..before long, the ‘cash on hand’ and ‘marketable securities’ on the balance sheet’s Assets dwindle.  And with a lower share price, issuing more equity – if the market window is still available – becomes impractical.  It’s best to manage post-IPO cash like it’s the last funding (not generated from business operations) that you’ll see.

2.   Report Relevant Success Metrics 

   Many new public companies are content to let equity analysts define their public ‘peer’ group against which to measure performance   Why not take the initiative and begin reporting on key drivers that are inclined to show your company’s progress?  If your customer retention rate is high, share the churn benchmark.

3.   Don’t Take IPO-Induced Analysts’ Coverage For Granted

   There is one sure-fire reason that an analyst initiates coverage of a small cap – when his or her firm is part of the financing, as few issuers will want an investment dealer in an underwriting syndicate or follow-on financing without analyst coverage to offer support. 

   Do not make the mistake of assuming that analysts who covered your company at the IPO will continue to do so.  This is especially true if your stock is trading at half or less of its IPO price, making a new financing unlikely.  Give the analysts a lot of attention and appeal to their desire to build a personal franchise
by having a ‘Buy’ on a company which may have stumbled post-IPO but now presents an upside opportuni
ty.


4.   Always Delight the 'Street' & Exceed Expectations

   Whether or not to provide the Street with ‘guidance’ on future performance is a decision that is increasingly being debated in Board rooms, whereas once it was taken for granted that guidance would be shared.  If it is, every CFO and CEO has an internal range of probability of performance outcome for the next quarter or year – all conceived with best intentions and the highest integrity.

   Analysts - to support a higher target price - may attempt to persuade management to acquiesce to the higher end of the forecast range.  If they succeed, management loses any room for unexpected operational challenges.

   My advice is to be prudently conservative - if guidance is to be given at all.  It is in everyone's interest to over-deliver than to disappoint - and the line between the two can be thin.
 

5.   Harness Media to Tell Your Story to the ‘Street’ & Customers 

  There are so many small caps vying for the Street’s attention.  Why not increase your company’s profile at less cost than advertising?  Invest in media relations, in-house or with a third-party professional.  
    
  Op ed articles under the CEO’s by-line on an important industry issue, appearing on business news shows, becoming a trusted source of analysis and sound bites to reporters… all build a company’s brand. 

  And don’t think for a second that the investment bankers, institutional investors, credit bankers and your customers don’t pick up on this coverage that may imply momentum.

6.   Don’t Ignore Retail Trading & Brokers

  Retail brokers have significant networks of high net worth clients.  If your small cap price has fallen post IPO that may be a buying opportunity for the local brokers who are looking to deliver upside to their clients.  Exposure of your ‘story’ to this network will take a lot of work – in person presentations to retail brokers or via retail broker conference calls.  

 7.   It’s About Momentum

  Finally, like any C-suite career, earning momentum is critical to building future value for a small cap.  Replacing post-IPO let-down and its downward share price with upward momentum requires a great deal of attention.  It also demands applying new skills by the CEO and CFO working together as a team to earn the Street’s confidence.

  This is a job that can’t simply be delegated to an Investor Relations department or to an external IR firm without skin in the game (but enjoying a retainer unrelated to results) representing scores of clients. Managing how investors perceive your public company, and communicating with the stakeholders who influence that perception, ought to be a priority for the CEO and CFO.  Too much is at stake to ignore this new focus since after a public listing it’s never business as before.