How Companies Can Navigate Their IR Programs Right After an IPO

In our last article, we focused on the rise of hybrid events and how IR teams can effectively integrate the hybrid approach into their corporate access strategy. In this bulletin, we discuss the significance of post-IPO investor relations and the steps IROs should take to manage their IR function proactively following an IPO.

While an IPO is an important milestone for a company, having a robust IR infrastructure after the IPO dictates the firm’s valuation and long-term success. The IPO market in the U.S. has seen remarkable growth this year with 339 IPOs (2020: 221 IPOs) and $159 billion in proceeds (2020: $81 billion) as of 10/24, according to Renaissance Capital; and it is showing no signs of slowing down. With so many private companies going through an exhausting IPO process, it is natural for them to tone down their pre-IPO momentum to regain their breath. However, dialing back at this stage could mean negating the visibility and interest that the company generated before going public. To prevent that from happening, IR teams have to take control and develop a proactive IR strategy to be executed after the IPO transaction. Having a robust IR strategy enables IROs to comply with federal rules, continuously disperse their unique value proposition, and maintain visibility among the investment community. This also helps the company achieve share price stability and active trading support, which boosts investor confidence in the company’s stock and can drive valuation higher.

We believe following are the key strategies and tactics that IROs can deploy post the IPO transaction for a successful IR program in the long term:

·????????Ensure that your new public company regularly complies with federal regulations. One of the most important aspects in having a strong IR function post-IPO is to completely adhere to the SEC’s and stock exchange’s regulations around the need to disseminate specific pieces of information and other certain mandatory disclosures to the market in a timely fashion throughout the fiscal year. For instance, a new publicly listed company has 90 days after the end of their first fiscal year to publish their 10-Ks. Compliance with regulatory obligations and crucial deadlines on a regular basis gives investors trust in the firm when they are reviewing past performance and communications of a possible investment.

·????????Collaborate with C-suite executives to develop and implement an IR program with well-defined KPIs and milestones for investors to track. Building an internal network within the company and working efficiently with C-level executives will be an important step for IROs to establish a robust post-IR communication and corporate access strategy. This will help IR teams visualize the company's long-term strategy, industry outlook, results/guidance, and key KPIs and milestones for investors. For example, the CEO can help envision the company’s long-term strategy while the Chief Financial Officer can aid in formulating the company’s revenue targets and help IROs disclose new business opportunities and the competitive landscape to the investment community. Moreover, frequently involving C-suite executives during non-deal roadshows (NDRs) or investor conferences and having these executives disseminate the company’s investment thesis also helps in building a strong rapport with investors and analysts.

·????????Adopt a proactive corporate access strategy aimed at identifying and introducing the company to new investors. It is important for IROs to create a corporate access plan for the year ahead with a well-defined purpose. This includes searching for potential investors that are likely to be interested in your company, followed by unveiling your investment proposition. To search for new investors and identify their compatibility, IR teams can use big-data driven approach to analyze the investor’s mindset and the factors that drive their investment decision making.

o???Engage with third-party firms that can support your corporate access strategy. Companies that do not have an in-house IR function or have a relatively young IR department can work with third-party firms to boost their corporate access strategy. These firms can help companies identify compatible investors and arrange virtual/hybrid investor events smoothly and efficiently. Conducting these events will also expand the company’s outreach and answer any possible queries that investors and analysts have on the company’s investment thesis. Aside from supporting corporate access, these firms can aid companies in other ways such as generating ideas and leads, targeting capital placement, and regularly communicating key company developments and milestones to the investment community.

·????????Refine your company messaging so it resonates with investors and maintain regular communication. During the IPO process, it is possible that a company’s story may not resonate with all investors. Therefore, IR teams need to refine it to meet the expectations of the end audience (investors). The investment community is likely to be looking for the company's expansion objectives, financial projections, management changes, critical milestones completed, as well as key KPIs to monitor the progress; therefore, having these elements in the company’s story is critical. In addition, once a company goes public, it is incumbent on IROs to keep investors updated about the latest developments. IR teams may do this by using IR newsletters and sponsored research (described below) to communicate their company's narrative to shareholders via direct e-mails, research platforms, and social media platforms. Further, IROs should strive to decrease information clutter and focus on conveying a signal (rather than noise) to their shareholder base, both retail and institutional. Alternatively, small-cap IROs can work with competent third-party partner firms to carry out the IR communication component efficiently, as discussed in the point above.

·????????Get sponsored coverage and ensure that your company’s narrative aligns with its broader messaging. Sponsored research firms can behave like an extended ‘marketing arm’ for a company. These firms can target and educate the financial community about a company’s investment thesis and its past performance before and after the IPO. Here, it is critical for messaging to be fact-driven and non-promotional, since its primary goal is to enable better investment decision-making rather than to inundate investors with marketing jargon and lofty claims. This approach will not only help the company after its IPO, but is also helpful when raising funds through follow-on public offerings, rights issue, or private placements, as it boosts awareness in the long term, especially if done in a structured and consistent manner. Another important aspect is to ensure that the company’s messaging, strategic needs, and long-term objectives in the reports published by sponsored research firms are in line with the company’s broader messaging. This will lower rumors/fake news surrounding a company by disseminating its story in a unified and consistent manner to the investment community. IROs should also aim to grow their network of research providers by creating an incentive structure that is beneficial to both the company and the research provider.

·????????Keep track of investors who met during the IPO roadshow but did not buy shares. During the IPO roadshows, not all investors are going to buy the company’s story outright since they might be skeptical about the management’s performance during tough periods, the company’s long-term growth prospects, industry outlook, or due to a multitude of other internal and external factors. Therefore, it is important for IR teams to keep such leads warm and continue engaging with them since even good long-term investors trade in and out of their favorite stocks from time to time. This will increase their chances of eventual conversion of leads to shareholders over the medium to long term.