How to Prepare for Successful Stock Offerings
Keeping a Company Positioned to Raise the Capital it Needs
Feb 15, 2009
Post-recession, raising growth capital and operating capital through stock offerings will depend more than ever on how well a company promotes itself with key players in the financial markets, and how successfully it builds solid relationships with them after the underwriters have gone home. Knowing how to do this is crucial.
For decades, companies gained much attention during Initial Public Offerings (IPOs). Subsequent stock offerings also garnered some attention. Now, companies face stiff competition getting the attention of the financial community. What's more, there is a sharply reduced number of players. As a result, the onus is on companies to get their information to industry sector analysts, corporate finance executives and institutional investors, among others.
Companies that fail to be assertive may well see the early momentum of a successful offering stumble, and fall victim to an apparently indifferent secondary market. Going forward, they will need to work harder than ever before to maintain share prices that reflect fair market value.
Beat the Crowd
Getting and holding the attention of financial markets after the recession eases will mean battling crowds of like-minded companies trying to win face-to-face meetings with sector analysts, lead steer brokers, private investors and other market makers, and finding ways to grab the attention of the financial and industry news media.
The answer? Beat the crowd. That means thorough preparation for those crucial meetings with key players in the financial community. This will involve:
- Investor Presentations: cover the obvious but focus on how the company will convert the capital being sought (or just obtained) into attractive returns for investors
- Collateral Materials: Support the investor presentation with handout copies of the presentation, corporate fact sheet, brief biographies of key company leaders, copies of the Offering Prospectus, current interim reports, recent news releases and press clippings
- Briefing Materials: These need to be prepared for the CEO, CFO, board chairman, and other key executives taking part in meetings. Focus on probable questions they will face in meetings and craft accurate, but brief, answers. Never ever play loose with the truth. Among the financial community, particularly given the recent scandals, credibility once lost, will never be fully regained.
- Monitoring and Follow-up Systems: Put systems in place to keep executives abreast of investor attitudes, so their interests and concerns are targeted in meetings, presentations and one-on-one conversations.
Post-recession, financial markets are going to respond best to companies that have weathered the recession better than peer group companies in their industry sector.
They will be especially receptive to companies with steady earnings growth, who consistently met their projections, and who kept them informed in a timely manner about business plans, results and any variations from plan.
But these gatekeepers of the financial community won't have this crucial information unless the companies take the initiative themselves. Few in the financial markets these days have the resources to do wide ranging research. To get their attention, companies need to do some of their research for them.
Maintain Contact
For the future, an on-going commitment to maintain contact the the financial community will help cushion market reaction during the difficult times that all companies experience, much less help lead the way out of the current economic mess.
Remember, investors are certain to be exceptionally skittish coming out of a recession-humbled business environment.
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