So you thought you were on the fast track to go public. You selected underwriters, increased investor outreach, prepared the organization, and probably attended a few conferences. But suddenly the markets turned, volatility came back, and the IPO window closed!
This is exactly the scenario that many companies have been facing this year. The NASDAQ Index is down 1.6% and the NASDAQ Biotechnology Index is down 20.8% year to date — not exactly ideal conditions to take your company public. However, sentiment has been improving recently, and the Volatility Index is at lower levels. The IPO window may indeed reopen soon, and if your goal is to go public when it does, we encourage you to use this time proactively.
Here are five things that we recommend doing now:
- Pressure-Test Your Message. Clarity, concision and consistency are critical “must haves” to effectively communicate your story to investors. While you wait for the next IPO window, now is the perfect time to determine how recent events (like drug pricing, the elections, or recent clinical events) have impacted your message and your company’s investment thesis. This is a great time to ask yourself these questions and pressure-test your current message and positioning strategy to ensure it is clear and able to stand up to investor scrutiny the next time the IPO window opens.
- Refresh Your Investor Deck. While the markets take a breather, this is the perfect time to re-evaluate and refresh your current investor deck. Maybe there are some recurring questions you have received that aren’t addressed in your deck, or you feel there are a few things that potential investors just aren’t fully appreciating. A good investor deck refresh gives you an opportunity to make some changes that better capture the key themes, catalysts, and direction your company is going in in 2016.
- Practice Being Prepared. A failed attempt at a public offering can damage your credibility for years. During the IPO process you will be making hundreds of presentations to potential investors. It is these presentations that win or lose investor support. You probably know your technology, the markets, and the science better than anybody, but invest the time in being able to be the best at communicating it. Use this downtime to find ways of simplifying the communication of complex scientific topics, preparing management teams on the nuances of their potential investor audiences, rehearsing Q&A, and even doing mock earnings calls. All this advanced work will help your story resonate best with potential investors.
- Continue Drafting. There are literally hundreds of steps required to go public and some are easier and less time-consuming than others. One step that can take some time is the drafting of the S-1 document. A good portion of the S-1 is put together with the help of your bankers and legal team, and with the IPO process that may be a bit in flux. The “Business” section, however, can take a lot of time to do right, it is one of the key pieces to the document, and it is one that banks and legal advisors don’t generally do. If the goal remains to go public, this is an opportunity to put the extra time into this critical section of the S-1.
- Maintain Your Outreach. As much as you are able, we encourage management teams to remain visible with potential investors. We have found, and it’s really no secret, that very few investors will purchase stock in a company after just one meeting. For private companies, with a limited track record/visibility with investors, this is even more of a challenge. When you think about it, an IPO is really a series of 30- to 40-minute speed dates. As a result, it is tough to get those great long-term investors you desire if you only meet with them once. Use any delay in your offering to seek additional meetings with investors. Make the IPO road show a second meeting and enhance your chances for a successful IPO.
It’s hard to wait for good things to come. This is especially true in the case of an executive, like you, who has watched peers successfully go public and worked hard to get your company IPO-ready, only to confront uncooperative market conditions. But an unexpected delay can be a blessing in disguise, if you take the extra time to strengthen your presentation, your relationships, and your preparedness for your eventual IPO.
Now’s a great time to check out our eBook, Westwicke Partners Insider’s Guide to Going Public, a comprehensive review of all the steps in the process, to make sure you haven’t missed anything. And for a deeper conversation about how to make the most of an unfriendly IPO market, reach out.