Advisory Intelligence: Being ready for the IPO

Nov 22, 2017
A lot has changed in the way companies go public, says Nasdaq

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For many companies, an IPO is more than just selling stock – it is an indication to the business world that this is a company that matters. An IPO is not only able to provide a company with access to capital but it also gets a market unofficial stamp of approval.

Tyson McCabe, senior director at Nasdaq Advisory Services, is in a unique position: while Nasdaq has led US exchanges in total IPOs for 2017, welcoming companies like CarGurus, MongoDB, Redfin and Roku to the public markets, McCabe’s team operates behind the scenes to offer insight on all the elements a company and its IROs need to get ready for the IPO. And there is only one opportunity to get it right.

‘A lot has changed in the way companies go public,’ McCabe observes. ‘Historically it was viewed as a binary event where most or much of the float is introduced to the public. It is no longer like that. Going out on the road and establishing relationships with investors is not just to attract them at the IPO, but to develop long-term demand that far exceeds the IPO and any potential secondary offerings. It has been a huge change, and it makes investor intelligence and understanding investor behavior all the more important.’

Moreover, IROs should use their time effectively to meet the right partners in the run-up to an IPO, highlights McCabe – so it is necessary to have the correct tools and services in place: an IR website with responsive design, surveillance and the tools for shareholder analytics.

‘You need to make sure the website is updated well in advance of going public with relevant information on your company to help the investment community understand your business and growth strategy,’ McCabe says. ‘And having intelligence tools about the buy-side community – which changes so quickly – is also crucial in advance of a market debut. The buy side continues to consolidate at an unprecedented rate to gain scale and global reach, and with that comes increased complexity.’

Nasdaq has tools to assist in this regard: the company’s Advisory Services business, its Nasdaq IR Insight platform and the recently launched analytics solution Insight360. ‘We understand, on an ongoing basis – from an aggregated point of view – the institutional investors companies are meeting with in real time,’ emphasizes McCabe.

That capability combined with Nasdaq’s newly launched benchmarking capabilities serve as a central component of Insight360 as a tool. ‘One of the challenges companies have as they go public is understanding what they are doing relative to some of their peers or firms they are competing with for capital,’ says McCabe. He notes that effectively benchmarking against similarly sized companies and having tools to drive and measure multi-year investor engagement programs are critically important in today’s capital markets, particularly for capital raising.

‘Stock surveillance is also vitally important,’ he adds. ‘At Nasdaq we do stock surveillance for thousands of companies globally – and for IR professionals at private companies preparing for an IPO, we think it is critical for companies to have ongoing stock surveillance as they go public.’

With the rise of passive index investing, meeting with and knowing the generalist analyst and investors – not just the sector specialists – is also critical pre-IPO, McCabe notes: ‘Understanding who are the really influential managers and analysts who oversee a lot of capital is crucial, because it is becoming a lot more competitive with the rise of passive investing.’

This is particularly true as newer companies look to define their identities in businesses that aren’t necessarily as simple or digestible as their predecessors. Additionally, as the buy side consolidates, it may not always be clear where the pockets of money are, so having a high level of intelligence going into the pre-IPO roadshow is that much more important.

And IROs need to be ready for the post-IPO milestones, which can come quickly, like the first earnings call, making sure messaging is consistent, and engaging potential sell-side analysts. ‘It can change based on location and disclosure regime, so what is true for the US is not necessarily true for other markets,’ explains McCabe. ‘But to stress the point, market intelligence is as important post-IPO as it is pre-IPO.’

This content was produced by Nasdaq Corporate Solutions and first appeared on Nasdaq's website.

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