Jul 20, 2023 - Economy

The role of communications during an IPO

Animated illustration of a blinking cursor forming the "I" in "IPO".

Illustration: Shoshana Gordon/Axios

Communicators have become more important players in transitioning a company from startup to grown-up through an initial public offering (IPO).

Why it matters: An IPO is the moment to tell the world why a company matters — and telling the right story with the right messaging to the right people is crucial for a successful listing.

State of play: Priming a company to go public typically begins 18 to 24 months in advance and requires a 360-degree communications strategy, says consultant Ken Shuman.

  • Communication teams should start by creating a corporate narrative that will have longevity and then double down on brand awareness and executive positioning.
  • This could show up in the form of a CEO op-ed, public speaking engagements or applying for industry lists and awards.
  • It could also show up in the form of long-lead coverage — like Alex Konrad's profile of Zoom CEO Eric Yuan, which popped in Forbes one day after the company's IPO.

Zoom in: Communicators not only play a major role in laying the groundwork for a broader narrative, they also play a major role in weaving that narrative into the S-1 form, which jumpstarts the IPO process.

  • "The most important thing is clearly explaining your business model, because once the S-1 is released, the media and general public either understands how you make money or they don't — and if they don't understand the business model, every story that comes out will be wrong," says Shuman.

Flashback: Facebook made this mistake during its IPO in 2012.

    • According to reports, the tech giant did not adequately explain its mobile or advertising strategy and it was unable to correct the narrative until after the IPO.

Be smart: Once the S-1 is filed, companies enter a profound quiet period.

  • That's why it's important to raise brand awareness and engage with the financial press long before filing the formal documentation, TrailRunner International CEO Jim Hughes says.
  • "As much as analysts are very quantitative people, they are also subject to the media environment just like anybody else. If they read about how great a company is in Axios, the FT or the Journal, that does bleed into their sense of how much to value this company. So that's all rooted in perception of value creation."

Yes, but: As long as there is precedent, it's fair game during the quiet period.

  • "There is sometimes a tendency to pull back on marketing and comms post S-1 because everybody gets nervous and you don't want to do anything that's going to run afoul of regulators," says Rebecca Buckman, marketing partner at Battery Ventures.
  • "But you should be preparing for the IPO so early that you already have regular comms and marketing in place, because once you file the S-1, you can continue with outward-facing programs that are considered in the normal course of business."
  • What's not allowed are interviews that disclose new business activity of any kind. Tinder CEO Sean Rad famously made this mistake ahead of parent company Match Group's IPO and Google gave an interview to Playboy that led to its IPO delay.

Between the lines: Message discipline is one of the most important tasks of a communications team during the IPO process.

  • "I'd say that probably a third of the process is coaching executives —not just with the media, but with investors," says Alex Jorgensen, head of investor relations at Prosek Partners.
  • "The weeks-long road show where they're taking eight to 10 meetings with investors every day is, from a storytelling perspective, the most intense crucible you could ever imagine."
  • Keeping employees informed throughout the process is also critical, because even the most innocent social media post could derail the process.

Zoom out: Listing day itself is a major opportunity for branding activations and celebration.

  • But throughout all the brouhaha, everyone in the company must be united around a consistent and confident message — regardless of how the stock performs on its first day.
  • "Comms teams work with management to make sure that they have a 30-second version of their business overview that they can offer to print or broadcast media," says Jorgensen. "And if they can do that, then it can be a really galvanizing moment regardless of the trading activity."

Of note: Don't forget about employees — after all, they are often the top shareholder base.

  • Whether it's sharing listing-day activities to employees through live coverage, like on the New York Stock Exchange's TV feed; or hosting company-wide events, like Levi's did when it held a community service event on its listing day; or something as simple as giving employees specialized swag — engaging and energizing the entire employee base is key.

The bottom line: When comms is brought on early in the listing process, their long-term strategies have the potential to generate positive buzz, align a wide swath of stakeholders, mitigate risk and ultimately lead to a stronger IPO.

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