How to IPO your business
Taking a company public is a significant milestone that comes with a mix of excitement and challenges. As someone who has navigated the complexities of IPOs before and is currently preparing JustFix for its own public offering, I’ve gathered plenty of insights that I hope can guide other business leaders through this transformative process. Here, I’ll share the critical considerations and steps involved in successfully taking your business public.
Do you really want to be a public company?
It sounds great, doesn’t it? “Yeah, I recently did an IPO of my company.” A successful IPO will tell the market, investors – even friends and family – that you’re doing well. But while there is considerable cachet and potential financial upside, it’s crucial to understand the responsibilities and pressures that come with it. Unlike a private company where you have more control over the flow of information, a public company operates under intense scrutiny. Your financials and strategic moves are laid bare for investors, analysts and the public to see, bringing a different kind of pressure.
In a public company, you must communicate regularly and transparently with your shareholders and the market. This includes quarterly or half-yearly financial updates and more frequent communications to maintain investor interest and liquidity. You also need to adhere to strict corporate governance standards, which can be a significant shift if you’re used to the relative freedom of a privately held business.
The benefits of going public
Despite these challenges, there are several compelling reasons to pursue an IPO. One of the primary benefits is liquidity. Publicly traded shares provide a clear, transparent market value, making it easier for investors to buy and sell shares. This liquidity can drive a higher valuation compared to private companies, as the ease of trading reduces the liquidity discount.
Going public also enhances your company’s visibility and credibility, which can attract customers, partners and top talent. It provides access to capital markets too, which can be crucial for funding growth initiatives and acquisitions. According to a report by KPMG, successful IPOs can significantly enhance a company’s profile and financial flexibility.
Preparing for the IPO journey
Preparation is key to a successful IPO. You’ll need to ensure your company is in robust health and ready for public scrutiny. Here are some critical steps:
Strengthen your financial reporting: Accurate and transparent financial reporting is crucial. Engage experienced auditors and financial advisors to ensure your financials are in top shape. This involves having audited financial statements for the past three years, or for as long as you’ve been in operation if less than three years.
Build a strong governance structure: A strong board with independent directors is essential. Establish committees such as audit, remuneration and nomination committees to oversee different aspects of governance. This separation of powers is a key requirement for public companies.
Develop a compelling equity story: Articulate a clear and engaging vision for your company’s future. Investors need to understand your business model, growth strategy and how you plan to deliver shareholder value. This story will be critical during your roadshow when pitching to potential investors.
Enhance internal controls: Implement robust internal controls to ensure compliance with financial reporting and regulatory requirements. This includes setting up systems for accurate financial reporting, risk management and internal auditing.
Engage professional advisors: Work with experienced legal and financial advisors who specialise in IPOs. Their expertise will be invaluable in navigating the complex regulatory landscape and managing communications with the market. You should consider hiring a PR and/or marketing person too, in order to get maximum news coverage and content marketing opportunities from the IPO.
The IPO process
The IPO process involves several stages, each requiring careful planning and execution:
Initial preparations: Engage with investment banks, legal advisors and auditors early in the process. They will help you prepare your financial statements, draft the prospectus and navigate regulatory requirements.
Due diligence: Conduct thorough due diligence to identify and address any potential issues. This includes legal, financial and operational due diligence to ensure your company is ready for public scrutiny.
Filing the prospectus: Draft a detailed prospectus outlining your company’s business, financials, and strategy. This document will be scrutinised by regulators and potential investors, so accuracy and transparency are critical.
Roadshow: Conduct a roadshow to present your equity story to potential investors. This is your opportunity to build interest and secure commitments for your offering.
Pricing and allocation: Work with your investment bank to set the IPO price and allocate shares to investors. This involves balancing demand with your funding needs and market conditions.
Going public: Once the shares are priced and allocated, your company will be listed on the stock exchange. This is a significant milestone, but it’s just the beginning of your journey as a public company.
Post-IPO considerations
After going public, your role as a CEO will evolve. A significant portion of your time will be spent on investor relations, maintaining transparent communication with your shareholders and managing market expectations. This includes regular financial reporting, investor meetings and maintaining a steady flow of information.
It’s also essential to manage the internal dynamics of your company. Ensure your team understands the new responsibilities and expectations that come with being a public company. Foster a culture of transparency and accountability to maintain investor confidence and drive long-term growth.
For me, taking JustFix public is a strategic move aimed at leveraging the benefits of liquidity, enhanced visibility and access to capital markets. However, the journey to an IPO is complex and requires meticulous planning and execution. By understanding the benefits, preparing thoroughly and managing post-IPO responsibilities effectively, you can navigate this challenging yet rewarding process successfully.
For those considering an IPO, I’m always open to sharing my experiences and offering guidance. Navigating this path can be daunting, but with the right preparation and mindset, it can also be an incredibly rewarding journey.
