A Public Affair

It’s one of the most coveted photo-ops in the world. Ringing the bell on the stock market floor has become synonymous with success, both personal and financial. An ultimate “look at me, ma!”, or, for the less romantic souls, a “f#$k YEAH!” moment. But once the bell echoes fade, and money and stock change hands, starts a very different race for many organizations, and not everyone enjoys the ride…

Bring Home The Bacon

Companies go public for a variety of reasons. Investors want to “take money off the table” in a liquidity event and move on to leverage their returns elsewhere. The company wants to raise capital to accelerate growth and scale. In some cases, both investors and founders want to bask in that bell-ringing moment and the ensuing status of a publicly listed company, but that is typically supplemental (although I’ve seen cases where that was the tilting factor in a go/no-go decision-making process, but that’s for another bonfire…).

Historically, companies went public in different stages of their lifecycle. Apple’s IPO happened some three years after its incorporation, while Microsoft took eleven years to ring the bell, Nike sixteen, and Estee Lauder almost 50... It seems that the longer companies took to go public the more their founders and executives understood that they will be entering a different phase in their existence, and they better be both prepared and amendable to everything it brings (not forgetting the bacon, of course).

One of the byproducts of the information and internet ages is the lowering of the listing barrier, including cost of time and services. It also means, as seen in the recent post-COVID listing flurry, you see more and more sub-scale, underprepared companies ring the bell, only to find out it’s actually a UFC ring and they are down for the count.

Underpromise, Overreact

I’ve worked for companies and boards trading on the London Stock Exchange, NASDAQ and Toronto. What one comes to realize, sometimes the hard way, is that these are very different playgrounds, with some similarities but notably distinct. They require different playbooks and toolboxes.

Just over a decade ago, performing Investor Relations duties alongside my day job at an LSE company, I sat down with a US West Coast fund manager, trying to get more Americans on the cap table ahead of a US launch. I had all our fiscal KPI, roadmaps, market analysis lined up, as I’ve done dozens of times by then. He came out of left field at me – “what are you excited about?”. It took me a minute to gather myself and adjust to a very different (and effective as I’ve learnt later…) point of view.

The old LSE moniker, “under promise, overdeliver” is a result of a sound, traditional, financially driven exchange. NASDAQ, while translating British into “beat and raise”, has a more growth-focused, “move fast and break things” 21st century attitude. Stockholm and Toronto introduce less stringent requirements but smaller investor pools.? You get the drift. What this all means is that when you adjust, and you must, you need to take into consideration what playing field, or battleground, you are stepping onto. But they all – analysts, fund managers, investors – hate the same things, across oceans and markets. Missing your mark and uncertainty.

In A PubCo State of Mind

What you may soon realize is that not everyone subscribes to this state of mind or cut out for the PubCo life and the emotional rollercoaster it brings. Your finance team is constantly engaged in either preparing or recovering from quarterly results. You need to step in front of cameras and people as a daily exercise, whether you like it or not. But the most dramatic effect this public stature can bring is constant defocus once you, your executive team and entire organization are engulfed in what often feels like a daily report card. nvidia, the current public golden child, recently reported good (but not amazing…) earnings, only to lose $279B of market capitalization in a day, the single greatest drop in history. That can’t help when you need to meet your delivery targets and sales quotas…

You can keep asserting that “you can’t time the market” or “market trends trump individual performance”. Often it feels like the famous US General William Tecumseh Sherman (no relation) quote: “You might as well appeal against a thunderstorm.”

In some cases, the PLC lifecycle resembles another public sector, the political one. The “Wartime CEO” header was inspired by Winston Churchill, the most glaring example of crisis-driven leadership during the 20th century, who was replaced soon after WWII with a (very) different leadership function. Tim Cook and Satya Nadella generated more shareholder value to Apple and Microsoft than their legendary founding predecessors. Mark Zuckerberg is a rare breed, taking his vessel from the garage through every milestone – IPO, hypergrowth, scale, scrutiny, regulation and counting. To each phase there are different types of leaders that best suite it. Keeping the train heading in the right direction sometimes means one needs to know when to get off. ?

Back in 2011 I was part of an executive overhaul at 888 that saw a young, mostly inexperienced team step in to change the ship’s trajectory, with a share price bottoming to a fraction of its IPO price, some six years before. One of the best advises I received then from one of our founding shareholders was “take your eyes off the share price, that’s for me to worry about”. Taking everyone’s eyes off the scoreboard, while you fix the team and product, isn’t always welcomed or natural, but that may be your first order of business in the boardroom. ?

Go Private or Go Home

The smallest Fortune 500 companies register circa $32B in annual sales. The biggest whale in our iGaming pond, Flutter, recently guided for just under half that figure for 2024 in what marks a successful growth year. While there are almost 7,000 companies listed between NASDAQ and NYSE, it affords some perspective regarding the economies of scale required to support the ongoing PLC overhead. Once a PubCo exhausts the merits of access to public capital, it should consider its mare justification. In other words, your next station may be a private one. I’ve discussed this in a previous article (“Back to the Garage”) from an operational perspective. Going private has its own colors and headaches, but by no measure it means going backwards. The ability to pivot, go back to basics or simply dedicate more resources to your core business can be the difference between putting your vehicle back on its tracks on your own terms, rather than having the market direct you to the nearest chop shop.

?

?

?