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IR and communications
Additionally, management gets the
majority of its face time with the investment
community through marketing events
with the sell side, such as conferences and
nondeal roadshows, and, as such, firms that
are willing to work with management to
set up a quality schedule should be able to
spend time with management over those
that focus purely on short-term investors
and high-paying clients.
When interacting with the sell side, it
is important to treat all analysts equally.
For instance, it may be beneficial to spend
time with analysts that are neutral or
underweight on the company to discuss
their investment thesis and to understand
the drivers behind their rating. It is,
however, typically preferred to market
with supporters of the company’s stock
because they spend the most time
promoting a company’s story with the
investment community.
Conclusion: An investor once said, “We
don’t shoot the messenger, we shoot the
cheerleader.” The financial community
can be remarkably perceptive and
insightful; information—especially that
which is market moving—flows through
it rapidly and it has a long institutional
memory. Regular, consistent and open
communications with investors are
instrumental in achieving an appropriate
valuation and high regard for the
company’s management.
5.3 Employee and business partner
communications
FTI Consulting
There are two other important stakeholder
groups a public company should take into
consideration. Employees and business
partners are integral to the success of
a company, but new regulations and
compliance with the SEC may change
the relationship with these stakeholders.
Many companies may no longer be able to
provide the same level of operational and
financial transparency, and management
teams need to educate employees and
business partners of this reality, while
maintaining their support during this
process.
Employees: Employees are the company’s
most valued ambassadors. Engaging them
as part of the IPO process creates a culture
of understanding that helps ensure clear
and consistent communication with all
other stakeholder groups.
Unfortunately, IPOs are potentially
disruptive from a cultural standpoint.
Executives and staff of private companies
that have never previously been public are
often accustomed to receiving financial
and operational data that can no longer
be shared under SEC regulations after the
company goes public, and some employees
will be asked to take on modified roles.
To manage this transition, the
company must realign its people around
its go-forward strategies and growth
prospects, while simultaneously preparing
them for new communications constraints.
Employees should be educated about
the rationale for a public listing, how
it can benefit them (e.g., new career
opportunities and employee stock purchase
plans) and—perhaps most critical—what
new responsibilities the company must
assume as a publicly traded entity.
Compliance with SEC and exchange
rules needs to be a company-wide effort,
and employees must understand that even
casual comments made to outside parties
(e.g., “I made a big sale today” or “Business
has been picking up lately”) can take on
additional meaning for the company’s new
financially-minded stakeholders. Under
the watchful eye of investors, financial
analysts, regulators and financial and
business media, employee actions have the
potential not only to affect the company’s
corporate reputation, brand and stock
price but also to subject the company
and themselves to risk and liability from
inappropriate disclosures. This risk has
been exacerbated as employees engage in
online chat rooms, blogs and other social
media channels that accelerate the speed
with which employee comments can reach
a seemingly endless universe of potential
recipients.
Key considerations that affect how
the company interacts with its employees
during the IPO period and beyond include
the following:
• It is critical for employees to
understand securities laws and SEC
regulations prohibiting insider trading
or tipping—particularly if they are
given opportunities to participate
in the offering. Employees need to
understand there will be a zerotolerance
policy on these issues.
• To maintain consistency in their
communications with the market and
avoid any inappropriate disclosure of
material nonpublic information, the
company should designate and train a
very limited group of spokespersons,
whose role is to discuss business
and financial results with the public.
Employees should be instructed to
forward all external inquiries to these
trained communicators and investor
relations representatives.
• In compliance with Regulation FD,
U.S. public companies must provide
the financial community with equal
and timely access to financial and
operational data. The company will
now issue quarterly and annual
financial reports, and even more
routine corporate announcements will
assume increased importance. However,
many companies can no longer provide
employees with the same level of
access to financial and operational data
they might have received in the past.
Employees need to understand this new
reality, know they are still important
and valued members of the team and
have confidence that the company will
continue communicating with them as
openly and honestly as possible going
forward.
• Sarbanes-Oxley regulations require
public companies to maintain
transparency and accountability in
documenting financial controls. In
many instances, these processes will
be established well ahead of the IPO.
The listing provides an opportunity
to remind employees of their
responsibility to protect sensitive data,
including client/customer information,
performance statistics and any other
information not available to the general
public.
• To be effective ambassadors of the
company, employees must be given the
right tools and resources to properly
represent the company. In addition to
training, the message platform should
be adapted to address employees as
well as investors to eliminate confusion
and guarantee consistency.
• To help the company meet the
expectations of investors, it is essential
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