Behind the Scenes: Stealth IPO
Eighty percent of IPOs now qualify for confidential S-1 filings with the Securities and Exchange Commission. Smart companies are preparing for the IPO well before the S-1 is secretly filed.
Of paramount importance is that a company’s external relations are operating at full tilt: media relations, analyst relations, blogger relations, social media and thought leadership . These activities need to be ramped up well before an S-1 is filed, as the SEC will take a dim view of increased PR firepower during an IPO.
Also before filing, a company may engage in preliminary meetings with select target institutional investors. This gauges demand for shares as well as get critical feedback from potential shareholders on matters of strategy, the competitive landscape and corporate governance.
The new normal is for companies to practice mock earnings releases and conference calls for two or three quarters in advance of the IPO. When the pressure is off is the best time to get this process running smoothly. A well-practiced group is more relaxed and can handle curveballs thrown at the first “live” earnings event.
Box, the cloud-storage company, has been preparing for its (now pending) IPO by allowing employees to pepper management with questions after the quarter closes.
Intel’s investor relations team views “anticipating Questions and Answers” during the conference call as a key indicator of the IR team’s performance. In a seasoned communications team, the goal is to anticipate 75% of the questions management will receive from analysts.
Prior to the IPO, management will want to carve out time to discuss how they will communicate as a public company. Will the company give guidance, or not, and of what type? Set guidelines for guidance, as well as disclosure and public comment before the S-1 is filed. Disclosure training for senior staff is also advised.
internally, the communications infrastructure is also built behind the scenes. This includes developing an IR website with a best-in-class vendor, and the capabilities for quarterly earnings calls, webcasts or — as Yahoo! is doing — live video feeds.
Coming soon: Once the S-1 is filed confidentially with the SEC, management will have 74 days left before the IPO (74 days is the average number of days companies spend confidentially discussing IPO plans with the SEC) — what’s next?
Suggested reading: “Confidential Discussions of IPO Plans Kept Brief,” from The Wall Street Journal [$], “The New Normal for Tech Companies and Others: The Stealth IPO,” from The New York Times; “Financial Statement Requirements in US Public Offerings: What You Need to Know,” by Latham & Watkins, “How Your IPO S-1 Flow To And From The SEC,” from Vintage Filings.
Photo: HAF F-16 Demo Team, Creative Commons License.