Are you considering an initial public offering (IPO) to open up new horizons for your company?

What happens during an IPO? What does communication mean for an IPO?

An Initial Public Offering (IPO) is a turning point for a company and can catapult it to new heights. In preparation for an IPO, it is essential to understand and implement the necessary regulatory and communication requirements and steps involved.

Communication becomes critical for a company’s liability as early as the point when the IPO preparations become concrete.

We are at your side to let you know from the beginning until the opening bell rings on the day of the listing and, of course, for the time afterwards.

After all, an IPO is not an end but a new beginning that presents your corporate communications with new challenges. To overcome these challenges, a well-planned communication strategy for the exchange with shareholders, journalists, and the public is essential. This will help you meet the capital market’s high transparency requirements and fulfil reporting obligations.

What is an IPO? How does an IPO work?

Before we describe the details and the importance of IPO communication, we describe the different phases of an IPO below.

An IPO, short for initial public offering, occurs when shares in a privately held company are first listed on a stock exchange.

Regardless of this event’s high level of confidentiality, a company should always be prepared for information to be released to the public unintentionally and have an ‘IPO leakage’ communications plan available.

Leakage communications: it can start with a rumour

Given that the IPO process can take a long time and that a company must appoint many advisors and providers to assist, investors often catch wind of a potential IPO well before it is officially announced.

Rumours may be triggered by a company appointing a new accounting group as its auditor or starting to work with external advisors – this can start the rumour mill turning.

IPO- The phase of preparation

1.        Internal evaluation: The company evaluates its readiness for going public, including its market position and conditions, financial analysis, discounted cash flow (DCF) analysis and compliance with regulatory requirements. This also includes a risk assessment. Risk factors such as industry competition, economic conditions and regulatory risks may impact the company’s future performance.

2.        Selection of underwriters: The company selects underwriters and investment banks to facilitate the IPO process. Underwriters play a crucial role in bringing a company to the public market.

3.        Due diligence: Extensive due diligence is conducted to ensure the accuracy and completeness of disclosures, legal and compliance and financial statements.

4.        IPO documentation: The company prepares the necessary financial statements, prospectus and legal disclosures.

The phase before the IPO: the pre-filing phase:

5.        Board approval: The company’s board of directors approves the decision to proceed with the IPO in an Executive Board meeting.

6.        Drafting prospectus: The company, along with its financial and legal advisors, drafts the prospectus, which provides detailed information about the company, its offering, its operations, financials, risks, etc.. The prospectus provides investors the information they need to make informed decisions about participating in the IPO. The prospectus includes a corporate governance report, an independent auditor’s report and a management discussion and analysis. (MD&A).

Management communication: The MD&A is a narrative explanation, through the eyes of management, of how the company performed during the period covered by the financial statements and of the company’s financial condition and future prospects. This disclosure and transparency are crucial for building confidence and trust among investors and regulatory authorities.

7.        Submission of registration statement:

The registration statement, including the prospectus, is submitted to the regulatory authority (e.g. Finma in Switzerland, the SEC in the US, BaFin in Germany) for review.

IPO - Waiting period

8.        The regulatory authority reviews the registration statement/prospectus and provides comments. They check that the prospectus is coherent, complete and comprehensible. This period is known as the waiting period.

IPO Communications during the Marketing- and roadshow phase:

9.        Public announcement/Intention to float: Once the regulatory authority has approved the registration statement/prospectus, the company publicly announces its intention to proceed with the IPO. An ‘Intention to float’ (ITF) announcement, published in a media release, includes a brief summary of the company, the amount it is seeking to raise and a rough timescale outlining when the offer will likely open when it closes. It also includes the information when allocation will take place and when the shares will be listed onto the market.

10.        Roadshow: The company, along with its underwriters, conducts a roadshow where its management, CEO, CFO and investor relations representative present their business, investment proposition and financials to potential investors. During the roadshow, feedback from investors helps determine the offering price and demand for the shares.

11.      Closing and listing phase:

  • Pricing: The final offering price is determined based on investor demand. The shares are allocated to investors based on their orders and the allocation criteria set by the underwriters.
  • Execution of underwriting agreement: The underwriters and the company execute the underwriting agreement, finalising the terms of the offering.
  • IPO/trading debut: The company’s shares begin trading on the stock exchange, marking its public debut.

After the IPO: The "post-IPO" Phase:

12.        Lock-up period: Insiders and certain shareholders are typically subject to a lock-up period during which they are restricted from selling their shares.

From the IPO date, the company faces public reporting obligations (ad-hoc communications) as it becomes subject to ongoing reporting requirements, including quarterly and annual financial reporting and other regulatory filings. Ad-hoc announcements prevent an unfair scenario by providing all stock market participants with the same information.

Not to be underestimated: the quiet period and communication rules

Particular attention should be paid to what’s known as the quiet period once a company has started the process of filing for an IPO. A “quiet period» does not mean a company must take a complete break from communication. General business communications can continue throughout the IPO process. So, if you have been conducting regular media interviews, sending out press releases, or publishing studies up to this point, you can continue to do so during the quiet period. It all depends on the topics and content.

IPO communication includes:

  • Developing and implementing a media and communication strategy, taking into consideration a stock exchange’s regulatory listing requirements.
    Without well-planned communication; no IPO will be successful. Often, the level of awareness of a company is low; therefore, media relations are critical. The geographical selection of the media is crucial in this regard, as is the type of media channel and background discussions with journalists before an IPO, both of which convey a correct and preferably positive impression of the company.
  • Developing meaningful core messages that should be used consistently to strengthen the corporate brand.
    At the heart of every company’s mission should be its brand message. It is necessary to define what constitutes the core of the corporate brand, its differentiators (USPs) and what are the key success factors.
  • Employee communication to prepare for the IPO
    While an IPO is traditionally seen as an opportunity for founders and early investors to capitalise on their vision and efforts to take the company to a new level, this step also represents a significant milestone for employees. For this, it is essential to prepare employees accordingly for the ‘dos and don’ts’.
  • Advice on the preparation and implementation of investor roadshows
    An investor roadshow is a series of presentations to potential investors at different locations in the run-up to an IPO. It is conducted by the management team, usually the CEO and CFO of a company. It usually includes a video or digital media presentation, the company’s brand promise, previous sales growth with projections and forecasts, earnings and financial performance, the investment opportunity and growth potential and the planned IPO share price target.
  • Media training in preparation for the listing
    The rhetorical appearance, storytelling, and consistent statements of the management are very relevant for the share price. Professional storytelling when dealing with the media and other stakeholders is an essential component of financial communication.
  • Media management: support and advice on communicating with journalists
    We advise and accompany you at media interviews, support you in answering general and critical media inquiries and help you build up the journalist network that is important for your company.
  • Advice and implementation of the IPO event (opening bell)
    In close cooperation with the stock exchange, we prepare all communications associated with the opening bell event so that this day becomes an unforgettable experience for you, your investors, customers, and employees.
  • Preparation and full implementation of associated “ad hoc communication” and public relations on the day of the IPO.

Tips and tricks in the pre-IPO phase

When an IPO is announced, the capital market is the centrepiece of communication (using what is known as an equity story). Months of preparation usually pass before then. Make the most of this opportunity and create the proper buzz!

How you can create sufficient buzz before going public.