If you have checked the news lately, it is likely that you have come across at least one mention of Initial Public Offering or IPO. Apart from new companies trying to find footing in the competitive market, several renowned enterprises are going public to raise capital.
IPO is the Bitcoin of 2018! Everyone is talking about it, everyone wants to own some, other people are making millions of it, but only a handful few know what it is.
In short, IPO is a permanent long-term change for your company that will determine the quality of your business and corporate structure. Since the infrastructure of each business varies from the other, the strategies cannot be one-fits-all.
IPO strategies require significant customization and adjustment during each stage. It brings us to our next point – despite the considerable differences, IPOs have three common phases: planning, execution, and realization. The subtle differences in strategies are all parts of these three stages.
We have prepared a 10-step breakdown of the three fundamental stages of an IPO journey.
Stage 1: Planning
1] Preparing for the evaluation of IPO
It is the first step of the journey, and it will determine the resulting value of the offerings. It will play a critical role in defining the success of the experience.
Apart from the zeal to see the journey through, you will require compelling strategic planning and understand the price drivers of the stock value. Learning about the key factors that are important to the investors will help the IPO value journey.
2] Maintaining more than one option
While plunging into IPO, you must remember that it should not be your only strategy. Even when it is the absolute right strategy, you should be able to invest in alternative exit strategies.
3] Understanding the timing
Like many other aspects of the share and equity market, the success of IPO depends on the essence of a schedule to a great extent. Your company needs to begin early preparations to do well in the market. The ones that are setting excellent IPO benchmarks had started preparing at least a year before going public.
Stage 2: Execution
1] Recruiting the right team
When a company goes public, a lot of changes within the fundamental infrastructure of the company. Apart from your regular team of legal advisors and financial accountants, you will require dedicated underwriters, attorneys, and auditors with experience in the fields of equity, finance, and IPO.
2] Redefining your enterprise infrastructure
Before your company starts selling IPO, you need to think about strengthening the load-bearing pillars of it. A robust support system will help with accurate financial forecasts. It can assist in meeting the regulatory compliance and shield you from the high risks of the unpredictable share market.
3] Setting up corporate authority
In today’s equity market, the creation of corporate body inspires confidence in the shareholder. When you begin your IPO journey, you must accept the fact that the governance of public companies is different from that of private ones. You will have to brave some groundbreaking changes to turn your private business into one with a public company board.
4] Better management of communications between the investors and the company
Apart from providing them with an opportunity to invest their hard earned money smartly, you need to provide them with enough assurance that their investment is safe.
While going public, you need to understand the importance of investor relations. Public companies cannot afford to overlook their investors and the relationship their enterprise shares with them.
Stage 3: Realization
1] Finding the correct analysts for your company
Recruiting analysts for a business is challenging in the first place. Then, looking for dedicated analysis experts, who specialize in the public sector, for a previously private sector company, is more than difficult. It is an expensive process for some, but it is also indispensable for maintaining the success of your IPO journey.
2] Getting the right investors on board
While you are looking for analysts for your new IPO, you have to start campaigning to attract the right investor. Time is of the essence when a private company decides to go public.
There is no way your enterprise can make it without reliable investors on board. It will require some impressive road shows, online promotions, and publications with profit extrapolations.
3] Meeting the aspirations
Most IPOs fall face first within a couple of years from the date of launch due to falling prices and lack of investors. The absence of a proper analysis team is another reason for such failures.
Nonetheless, a public company needs to provide the shareholder value by upholding the promises they made to the investors. It is possible when a company utilizes the IPO profits for the purposes detailed in the IPO plan.
Several causes can egg an organization on the IPO journey. Irrespective of the different reasons your company is going public, your journey will likely consist of the stages we have mentioned above. Following each step chronologically will help you approach the success of an IPO strategy.