Mike Bellin, U.S. IPO Services Co-Leader at PwC, talks about shifts in the capital markets and what companies considering an IPO need to understand and do to succeed in the current environment.

1. First things first: How has the IPO landscape changed, particularly during the pandemic? 

Bellin: After a slowdown in early 2020, IPOs have surged, demonstrating the resilience of the capital markets.

But the “going public” process has changed. Post-IPO, we’ve seen more limited lock-up periods and shorter times to follow-on secondary sales. And drafting sessions, roadshows and investor meetings have gone virtual.

• As for volume, the “SPAC attack” resulted in 360 special purpose acquisition companies forming in the first half of 2021. That’s a huge shift creating more opportunities to go public.
  

• And traditional IPOs are booming, according to a PwC analysis of SEC filings. There were almost 100 in Q2 2021 — the highest volume in 20 years.
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2. Why now? For companies looking to go public, is now the right time?

Bellin: Each company is unique, but one thing is certain: The investing power and capital available today for businesses with growth potential is unparalleled in history. 

A combination of favorable interest rates, positive economic growth expectations and high investor returns should keep the IPO window open. Also, SPACs typically have two years to find a business to take public, so the clock is ticking through this year and 2022.

• But companies still need to ensure they have the people, processes and systems across functions to be public. 
  

• Ideally, they would spend a few quarters practicing “being public” to ensure timelines and requirements are achievable.
  

3. Here’s how: There are many ways to go public — IPO, SPAC, direct listing, etc. How can companies know which works best for them? 

Bellin: Although the goal of being public is the same, companies need to understand the nuances of each journey to going public. Key questions include:

• How much access to capital will your company need before and after going public?
  

• How much control of your company do you want to have on such matters as pricing and liquidity levels?
  

• Can you accelerate your public company readiness timeline and still address accounting and financial reporting requirements?
  

4. More info: How can companies address their readiness? Are there specific areas to evaluate to achieve a successful transition to a public company?

Bellin: The short answer: start early. Management should do a public company readiness assessment well ahead of going public. 

Management will need to balance the work of going public with being public and be prepared to meet shareholder and market expectations on day one. 

• This includes addressing ongoing compliance and regulatory requirements, operational effectiveness, risk management and periodic reporting.
  

• One important success factor is identifying resource requirements, including where gaps exist in skill sets and bandwidth. 
  

• In more complex areas like accounting, enlisting the right advice can help limit surprises, improve efficiency and reduce the time to market.
  

5. The result: What can businesses expect after successfully going public? What are some good outcomes?

Bellin: Ideally, the capital markets continue their current run and investors see substantial returns. 

While strong topline revenue growth is important, other areas like proper compliance and a strong controls environment are just as critical. 

• Also, companies must have a strategy for investing in broader societal issues, such as environmental, social and governance (ESG) efforts.

6. Next steps: What should companies do to protect and grow their business after going public? 

Bellin: Challenging as the process can be, the IPO itself is simply a milestone in a company’s life cycle and being public should be the mindset from readiness onward.

• Management must be ready to provide accurate forecasts to the investor community and share expectations and key performance indicators (KPIs).
  

• Frequent communications with investors, analysts and media is essential for ensuring your company’s story is being told accurately, as public perception can directly affect share value. Underestimate it at your peril.

Considering an IPO or SPAC to fuel your company's future?

Join PwC on Tuesday, October 26th for their Roadmap to an IPO Webcast to hear first hand from companies and advisors who have recently executed successful public transitions amidst the current market landscape. Learn about the preparations needed to both go public and be a public company, and what your team can do to be prepared when the time is right. Register Here.