The road show you take in conjunction with your company’s initial public offering (IPO) represents an exciting and action-packed two weeks. Over that period, you will crisscross the country, meet hundreds of potential investors and spend way too much time on airport tarmacs. While your bankers will have thoroughly prepared you to deliver your “story” to the Street, I thought it would be helpful to share some other thoughts about road shows based upon the thousands of IPO road show meetings Westwicke team members have participated in during our Wall Street careers. Here is my list of the top 10 things bankers probably won’t tell you about IPO road shows:
- You are always on stage. Be respectful and professional at all times – not just in the meeting but in the waiting area and car, as well. Often you will be traveling with an institutional salesperson so remember that this person has a relationship with the analyst or portfolio manager you are about to meet…don’t say anything that would allow them to give negative “color” to their clients.
- Let the person on the other side of the table get the question out. I see this all the time: senior management begins to answer the question in the middle of the question. Let the analyst or portfolio manager completely ask his or her question. Then, clearly answer that question.
- It’s OK to not know the answer. If you don’t know the answer…just say “I don’t know.” Take note of the question. Get the answer after the meeting, and make sure you communicate back to the analyst or portfolio manager through the equity capital markets (ECM) desk or salesperson covering the account.
- Road show comments will be referenced in future meetings. The process of buying a stock often takes a few meetings. On the IPO road show, investors get a feel for the business and management team and then want to see the company execute over some period of time. Don’t be surprised during a second meeting that many of the things you said during the IPO will be referenced.
- Take the high road when discussing your competitors. Nothing good comes from criticizing your competition. The analyst or portfolio manager you are meeting with may own the stock of one of your competitors and may ask about your view of the industry players. Stay positive or stick to commenting only on your own company.
- Don’t get discouraged if they have no idea what you do. While many of the folks you meet with will have read the S-1 thoroughly, many will have a thimble’s worth of knowledge about your company. Don’t get bummed that they didn’t do their homework. Now’s your opportunity to deliver your message and growth strategy to an audience with an open mind and no preconceived notions. Often, these are the best meetings.
- Don’t comment on valuation. In over 20 years of working with the buy-side, I have figured out that they want to figure out what a company is worth- not be told “we’re a cheap stock.” Every CEO thinks his or her stock is cheap. Your objective is to lay out your growth plans and then work hard every day to deliver on those goals. Let them worry about valuation.
- Don’t get discouraged if good meetings don’t translate into an order. Some of your best long-term shareholders will not buy on the IPO. Use this initial discussion to stay in front of the account and, over time, they will likely buy your stock.
- Quality comes in many forms. The IPO road show will afford you an opportunity to meet lots of quality accounts – some will have household names and others will be less familiar. Don’t be too quick to judge an account based on its name. Your bankers will do a great job of getting you in front of quality accounts that can own a meaningful position and have a long-term investment horizon.
- When it comes to pricing the deal, you have a say. While investment banks that you have chosen to execute your IPO have a wealth of knowledge and expertise in properly pricing the IPO, you also have an important role in both the pricing and the allocation of your deal.
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