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IR and communications
critical that preparations begin during the
pre-IPO phase to allow adequate time for
benchmarking and planning, and so the
company will be ready to go “live” by the
time the IPO prices.
Key elements of an effective financial
communications strategy include the
following:
• Consistency—investors will be
looking for new information in
every interaction with management,
and any variations in messaging,
content, tone or frequency/timing of
communications can be seen as an
indication of changes in the business
or outlook that could affect the
company’s stock price. Consistency in
communications is paramount, yet the
company must also allow sufficient
flexibility to adjust to business
conditions.
• Benchmarking—an important first
step is establishing a framework for
how the company will communicate
to the financial community. Key
to this process is analyzing and
benchmarking how industry-leading
and peer companies communicate to
their financial audiences. Investors,
the media and other key stakeholders
assign companies to peer groups
against which they evaluate the
company’s performance. It is
therefore important to understand
thoroughly the standards against
which the company will be
evaluated—in terms of both peers
and best practices.
This benchmarking study should
encompass a full range of materials
scrutinized by investors, including
financial and regulatory filings, press
releases and transcripts or webcasts
of public events such as earnings
conference calls, investor conferences
and analyst events, and should include
the timing of peer group reporting
as well as content. As a general rule,
the company will be judged on the
completeness, quality and accuracy of
the information package it provides to
the financial community.
• Financial and business metrics—the
company should identify early in
the process the metrics and other
information it plans to provide to
investors post-IPO and consider
whether this information can be
included in the registration statement
to provide additional consistency.
Specific consideration should be
given to the metrics that peers use to
describe their businesses and provide
guidance on future performance, as
well as additional supporting material
they provide. Understanding and
accommodating these standards—or
proactively addressing differences—
will keep the company in sync with
what investors are accustomed to
receiving from other companies in
the same industry and demonstrate
a commitment to open and honest
communications. Additional financial
and operating characteristics critical to
understanding the nature and strength
of the business can and should be
provided.
• Nonfinancial disclosures—one
of the most frequent and visible
communication opportunities is
the reporting of quarterly financial
results. In addition to meeting SEC
disclosure requirements, investors
expect management to interpret results
and provide additional commentary
on business developments via the
earnings release and conference call.
These communications should go
beyond the prescribed financials and
the financial metrics by incorporating
business commentary, industry and
segment trends and other qualitative
information.
• Guidance—guidance continues to
be a controversial topic within the
investment and corporate governance
communities. However, an important
driver of equity valuation is the
ability of investors to forecast future
earnings and cash flows. How the
company provides forward-looking
commentary through guidance can
significantly affect the valuation of
its stock. Research has demonstrated
that relatively frequent, accurate
and granular guidance is associated
with a lower cost of capital; yet the
risk of not meeting expectations,
a possible duty to update and
potential liability concerns demand
careful consideration. To be aligned
with investor expectations, and to
address any differences in disclosure,
guidance policies of peers should
also be analyzed and factored into the
decision.
• Online communications tools—the
investor relations section of the
company’s website is often the first
landing spot for investors seeking
more information about the company.
As such, it should be user-friendly,
interactive and easily accessible.
Visitors accessing the site must be
supplied with the information they
need to conduct initial due diligence
on the company and help them advance
their investment decisions about
the stock. Information that can be
dynamically updated regarding the
business, key executives and strategy
will help investors better understand
the company and its future prospects.
• Training—management teams without
public company experience should be
trained to communicate with investors
within the regulatory framework.
The market will respond favorably
to executives who are forthcoming
and open about their businesses.
However, engaging with investors in
real time subjects executives to the
risk of making selective disclosures
of material nonpublic information,
which is prohibited under Regulation
Fair Disclosure (FD). It is critical for
executives to understand the parameters
of what they can discuss. Trainings may
also be helpful for executives unfamiliar
with Wall Street to better understand
the different roles of the sell side and
buy side and how that may impact how
they interact with different individuals.
Even as the company seeks to
refine its communications strategies,
it is important to understand that
investors will look well beyond its
direct shareholder communications for
insight into its business prospects and
investment potential. In addition to
traditional investor relations, the company
should consider its corporate and media
communications strategy as part of an
entire communications approach. This
includes assessing news trends, building
relationships with reporters, influential
bloggers and industry analysts, and
understanding how peer companies are
portrayed in the media.
NYSE IPO Guide
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