Taking your company public is a big decision and should be done with the understanding that you have a responsibility and commitment to your public shareholders when you take their investment.
Many companies feel a sense of success and accomplishment upon becoming public, and they should, however, the true success and work is just beginning. You now have a responsibility to work diligently, to inform and communicate, who you are and how you’re going to accomplish your goals.
In addition to the core product or service of your company, to which you surely will devote appropriate financial and human capital to marketing, you now have a second product, namely the stock in your company to which you must also devote appropriate financial and human capital to marketing.
You will be competing with approximately 20,000 other public companies for the attention of both direct investors and their financial advisors. Unless your product or service is already well-known to the general public, you may be assured that, without the devotion of appropriate human and financial capital, the marketing of that second product, it will not come of its own weight to the attention of either direct investors or their financial advisors.
As part of that process you must be committed to acting in a completely transparent manner and disclose all material information, good or bad, in a timely manner. You are also responsible for making sure this communication is done in such a manner as to keep your investors informed and engaged.
As a public company, a high-ranking representative of the company’s management team should be assigned the responsibility of being the individual leading the team dedicated to this communication. It is extremely important to have this dedicated individual in a position to explain disclosures and present the company’s plans, and its mission, to shareholders and investors. That person must also have an adequate budget to accomplish this purpose.
A public company should have a clear “mission statement” that shareholders and potential investors can understand and follow.
Do not let the market, or the reporters and analysts, define your company and its goals. Be certain that your company defines who you are. Getting long-term and serious shareholders, and investors, is the goal of this effort.
Once your mission statement has been developed, all communications, websites, print and social media representations should be clearly presented and explain and define this mission statement. Your shareholders and investors will begin to understand your company and judge it and its performance by the company’s ability to meet its mission.
As a public company you must utilize all of today’s advanced communications to keep in touch with your current shareholders and the larger investment community. These communication tools start with a fully-descriptive, communicative and user-friendly website. One of the ways of improving communication is to see if the URL of your company’s trading symbol is available and purchase or acquire it and use this as one of your website domains.
Your website should clearly describe your mission statement and the key person that is the investor contact at your company. You can hire an IR firm but in small to mid-size companies a management person should be readily available.
Shareholders and investors are interested in hearing about a company’s progress directly from the company. They will become more connected and invested in your company if you maintain direct contact. Therefore, companies must keep and maintain current contact and email lists of all shareholders and investors.
You need to make it easy for shareholders and investors to add their names/email addresses to your contact lists. This can be accomplished via your website and various communications. In addition, any time management meets with interested people or institutions, their names/email addresses should be added to your list.
Another important method of communicating a company’s story is by setting up a Facebook page. Here, you can “discuss” progress and give investors and potential investors a visual feeling of what’s happening with your company. All investors cannot visit your facility or see your laboratory, they can, however visit your Facebook page anytime, anywhere.
Although social media is a very important tool in informing the investment community, a small or mid-size company still needs to meet investors and brokers in person. Therefore, it is key to develop a slideshow presentation of no more than 20-25 slides that easily defines a company and its plans, both immediate and future. Again, it should begin with a clear mission statement.
The company should plan to have its communications management team member have direct visits with shareholders, potential new investors and brokers in key cities and countries, if appropriate.
Also, if there are effective conferences in a company’s particular industry or investor conferences, the company must be prepared to attend. However, you must carefully pick which conferences because money and time can be spent attending conferences with no results. Hiring a professional that can lead you to the right conferences and set up meetings for shareholders, potential new investors and brokers is a good idea. Picking the right conferences and meetings is a key way to control the cost and get the most effective effort.
The decision to go public is one of the most important in a company’s life. The costs, legal expenses and time complying with regulations is significant for all companies but more so for small to mid-size companies. The benefit, however, is also significant and, it’s not just for the capital raised.
The fuel behind the growth and success of the American economy and the health of its entrepreneurial spirit is uniquely enhanced by the act of a public offering. However, most companies understand that the capital obtained from going public is the key to their ability to grow, or even discover new technologies. What they don’t understand is that it is just a small part of the benefit of going public.
More important than the capital raised is the ability to continue to tap into the capital market to further advance the company’s goals, use the company’s publicly-traded shares to acquire other companies and technologies and to attract a dedicated and experienced management team.
But, none of that will ever happen unless the company is committed to the strategy of communicating with the investing public.
The main goal of a public company is not only to provide society with the goods, services and technology it needs but, to create wealth for its shareholders and management. Without successful and significant communication these goals will be very difficult to obtain and, in most cases, impossible.
The cost of this process is, no doubt, a challenge for small to mid-size companies but; the real question is not, “Can the company afford to do it?”. The real question is, “Can the company afford NOT to do it!”.
Damon D. Testaverde
Director of Investment Banking