The US regulator proposed a plan at the beginning of the year for companies to be able to “test the waters” for a potential initial public offering by gauging investor interest ahead of time.
In 2017, the SEC extended to all companies the right to file IPO paperwork confidentially. The initiatives are part of an effort to boost the number of public companies in the US which have been on the decline for a number of years now.
In Australia, IPOs are on the rise.
This week, Osteopore (ASX: OSX), the company where I am Executive Director, was the 35th to list this year and there are, at least, 35 more scheduled to begin trading on the ASX before 2020.
At this hump point in the 2019 listings, it’s pointing out some key lessons that can make for a successful IPO process.
At the end of the day, an IPO is essentially a project, and like all projects a good project manager is critical.
It’s imperative to make sure you allocate project management to someone and make sure they are in charge in a full-time capacity. Do not assume your Business Development Manager will be doing his or her normal job and managing the IPO process on the side.
It is also best to have the manager as an internal resource.
The lawyers, corporate advisors and accountants will help, but accountability for the overall project management should be within your company.
An IPO is a team effort – no-one can do it all.
You need to have a team mindset on getting things done, with the IPO process being a key part of the whole team’s responsibilities. Try to avoid “silos”.
It’s important that people know what is expected of them, but also important that people are across what other people are doing and might need.
Making sure the team is adequately resourced throughout the process is also important and consider what resourcing is needed for reviewing and editing documents like Prospectuses (or sections of the Prospectus) and presentation materials.
Good Advisors Matter
Having people in the team who have done it before makes an enormous difference.
You may not have people in the company who have done been through an IPO before, and that’s fine, but make sure there are advisors who know what is expected and what is required by investors and by regulators.
Getting professional service providers who are familiar with the type of IPO process you will be going through (are you raising a lot of money or a little, is the company going to be in the ASX 200 or is it a smaller enterprise) is vital.
The right advisor has been there before, if not with a company identical to yours at least with companies that are similar and face similar issues.
Little things can bite you.
Haven’t quite got the right accounting treatment for R&D expenses sorted? Haven’t got all the IP assignment deeds correctly signed? The lease agreement wasn’t signed by two directors as it was meant to be.
All these things will be found out and will need to be corrected and, no doubt, one of them will suddenly need to be sorted out just as the counterparty is on leave or has retired, and his successor doesn’t know anything about the document that you now need signed at the last minute.
As early as you can, identify the little things that need to be done, especially anything that involves a third party. Get onto them ASAP.
Hopefully, it only takes a quick email and five minutes to amend or sign a document but there’s always the chance it is harder than you think, and you end up running out of time.
Things will go wrong
You have your Gantt chart with all the required activities and timelines.
Now add a month, at least. Maybe two.
Be prepared for something to derail your Gantt chart and no-one knows in advance what it will be.
Perhaps something pushes the roadshow dates out by a week. No big deal, you initially think. But then it is pointed out that you’ll be trying to roadshow over school holidays and half the investors won’t be around, so that’s another two or three weeks of delay.
Or perhaps one of the little things that you thought would take five minutes to deal with has suddenly turned into a five week saga because the person who you need to deal with is on long service leave.
These things happen and it’s important to accept early that your timeline, almost definitely, will not be met and leave room to move.
Build that contingency into your timeframe and have room for flexibility.
The IPO is the Beginning
The deal is done, the money is raised, and you’ve listed on ASX with solid support from investors – fantastic!
It’s an incredible feeling after months of hard work and effort. But that is just the beginning. Once you have listed, you cannot sit back and expect the market to follow your activities.
You need to think about what you can use as a reason to go back out and roadshow the company a month or two after it’s listed.
Keep in investors’ minds and tell them what you’re doing and plan to be doing. Answer their questions and make sure you have allocated executive time to comprehensive investor and broader engagement.
This is an area often neglected by newly-listed companies and it is the key to success. Investors will quickly want to see a reason to stick around after the initial share price spike. Give them a reason to give you long term support.
Give investors reassurance and keep touching base with them. Let them know you’ll be putting their funds to good use to grow and develop the company which is why you should have listed in the first place.
- Geoff Pocock is the Executive Director of Osteopore.