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IR and communications<br />
Developing strategies for<br />
disseminating positive announcements<br />
and managing difficult news will pay<br />
long-term dividends, helping build the<br />
company’s brand, enhance its reputation,<br />
build management credibility and protect<br />
valuation. Companies must have the<br />
proper response mechanisms in place<br />
to address crisis situations quickly and<br />
effectively, including those crises that may<br />
occur while the company is still in the IPO<br />
quiet period.<br />
Planning, vigilance and transparency<br />
are the most effective investor relations<br />
tools a company possesses. By developing<br />
a comprehensive communications<br />
strategy that provides for consistent<br />
communications, meets (or exceeds)<br />
peer standards and provides required<br />
disclosures, the company can prepare,<br />
pre-IPO, to thrive in a public environment<br />
and adapt efficiently to the many<br />
surprises and challenges that will<br />
inevitably arise.<br />
5.2 Communicating with the market<br />
post-IPO<br />
FTI Consulting<br />
While an IPO marks a significant<br />
milestone in a company’s history, it is only<br />
the beginning of an ongoing process of<br />
building value for its shareholders.<br />
The company’s operating performance<br />
will be an important driver of value<br />
creation. However, financial markets in<br />
their role as a discounting mechanism<br />
assign value to the company’s future<br />
earnings and cash flows supported<br />
by, among other things, intangible<br />
factors such as investors’ confidence<br />
in the business model, their belief in<br />
management’s ability to execute the<br />
stated strategy and their perceptions of<br />
the company’s credibility, transparency<br />
and corporate governance structure. All<br />
these intangibles are greatly influenced by<br />
how the company communicates to the<br />
financial community.<br />
From management’s perspective, the<br />
goals of investor communications are to:<br />
• optimize the value of the company’s<br />
equity (or conversely, minimize the<br />
cost of equity capital) over time within<br />
the context of both the company’s<br />
performance and macroeconomic and<br />
industry trends; and<br />
• protect management’s credibility<br />
and reputation within the financial<br />
community.<br />
Since investors have no role in the<br />
operations of the company, they rely on<br />
management to protect their investment<br />
and keep them informed on the status of<br />
the business. This requires a commitment<br />
of management to engage the financial<br />
community in a credible, honest dialogue.<br />
Regulatory parameters for communicating<br />
to the investment community:<br />
Communications strategies must<br />
accommodate not only the information<br />
that must be filed with the SEC under<br />
securities regulations but also broader<br />
communications “best practices” that<br />
can be more complex and demanding. In<br />
particular, management must determine<br />
whether a corporate development or<br />
change in outlook is material and must<br />
be reported; this determination can be<br />
difficult when there is uncertainty about<br />
the future or a wide range of variability<br />
around potential outcomes. Furthermore,<br />
Regulation FD provides that if management<br />
discloses material nonpublic information<br />
to some investors or analysts, it must make<br />
the same information available to everyone.<br />
In practice, this requires management to<br />
provide access to material information<br />
simultaneously to all market participants,<br />
necessitating careful attention to the<br />
timing, content and delivery mechanism of<br />
each communication.<br />
One key example of how Regulation<br />
FD affects financial communications<br />
is the decision by many companies to<br />
instate an earnings “quiet period” in the<br />
weeks leading up to the reporting date,<br />
during which they will not meet with<br />
or talk to investors. This quiet period<br />
and the inability to respond directly to<br />
a question come at the awkward time<br />
when the company’s results are known<br />
by management but not yet reported<br />
publicly.<br />
When companies have reported<br />
results and are ready to resume meeting<br />
with investors, they generally not only<br />
file the earnings information with the<br />
SEC but also issue a press release using<br />
a distribution service and post it to their<br />
investor relations websites to ensure<br />
equal access for all interested parties.<br />
If an inadvertent disclosure of material<br />
nonpublic information does occur, it is<br />
important for the company to make that<br />
information public promptly. Regulation<br />
FD defines “promptly” to mean as<br />
soon as reasonably practicable, but in<br />
no event after the later of 24 hours or<br />
the commencement of the next day of<br />
trading. (Regulation FD is discussed<br />
further in Section 5.4.)<br />
Developing and refining a core message<br />
platform: Essentially, the company’s<br />
shareholders are placing a bet on its<br />
future success. Accordingly, ideal<br />
communications provide a roadmap to<br />
the future and then maintain an ongoing<br />
flow of information about the company’s<br />
progress in achieving its goals. Developing<br />
and maintaining a core message platform<br />
that clearly communicates the company’s<br />
goals, market opportunities and growth<br />
strategies is critical for ensuring that<br />
the value drivers are well articulated<br />
and consistently delivered across its<br />
communication vehicles and channels.<br />
These messages should build on those<br />
developed in the pre-IPO phase, with<br />
adjustments made as needed to dispel<br />
any lingering concerns or misperceptions<br />
about the company’s positioning in<br />
the market, its performance within the<br />
current economic climate and the issues<br />
surrounding the industry as a whole. To<br />
ensure consistency, all audiences should be<br />
considered when developing the message<br />
platform.<br />
In cases where there is significant<br />
investor churn in the period following the<br />
IPO, it may be advisable to do a more<br />
thorough vetting of perceptions to ensure the<br />
company is addressing the concerns of<br />
the current investor base. Specifically, the<br />
company should conduct research that:<br />
• ascertains the investment community’s<br />
current views of the company,<br />
management team, strategy and<br />
prospects;<br />
• analyzes drivers behind buying and<br />
selling activity post-IPO;<br />
• identifies areas of potential<br />
misunderstanding of the company’s<br />
positioning/prospects; and<br />
• compares its own communications<br />
efforts to those of the peer group to<br />
identify areas that may require further<br />
explanation going forward.<br />
52 NYSE IPO Guide