A few months back I published a piece about the RF Semis Market. It was a topic I had been waiting a long time to write about. This post is the beginning of a series of posts which I have been planning even longer. Over the next few weeks (hopefully, but maybe months), I want to take a long look at the IPO process. Once upon a time, all private companies saw going public as a major goal in their maturation. But in the last few years, many companies have changed their outlook, looking to delay or even avoid an IPO. I started thinking about these posts in the years before Facebook went public, when it was clear they were delaying their IPO for as long as possible. Being a public company, and more importantly being an executive at a public company, holds many challenges. It is not easy, and the rewards seem less exciting than they once did.
Nonetheless, I think going public is something most successful companies will have to seriously consider at some point. In these posts, I plan to explore the practicalities of actually becoming a public company.
As a research analyst, I participated in almost two dozen IPOs, and had a front-row seat for another 100 in which my colleagues participated. In that time, I saw too many IPOs go very poorly. After a while, I was able to discern a pattern. Like some inverse of Tolstoy, all the successful IPOs were different, but the troubled ones were all the same.
If you, or someone you know, is thinking about entering the “Process”, be forewarned there are lots of potholes which can cause lasting problems. But there are also some best practices. My goal with these posts is to lay out some of those, working towards an ‘ideal’ IPO.
At this point, I imagine many management teams reading this are thinking to themselves, “I do not need to read this, my bankers will handle it.” But the bankers are only a small part of the story. They will handle the mechanics of the deal, and get you to the listing, but forward-looking executives need to plan for what happens after the bankers leave. To put it bluntly, bankers get paid the day of the IPO, but the CEO has to then run a public company long afterward. Actions taken in the IPO process can have serious consequences lasting years beyond the IPO. Cynics will say the bankers are long gone by then, off to the next deal. A fairer interpretation is that bankers have a particular skill set, but one which can only solve one part of the equation. In the coming weeks, I will look at the whole equation. My goal is to help companies make a clear decision about going public and to lay out a lasting game plan. At the very least, I will provide some thoughts about how to best manage the bankers.
In this series I plan to cover the following topics:
The IPO Series Outline
- Why Go Public
- What to Expect (or Why to Not Go Public)
- The Players – Incentives Matter
- How to Choose Your Bankers
- The “Process”
- The Dividing Line – Look Before You Leap (How to Prepare for the Public Markets)
- The Importance of Expectations – The Most Important Chapter
- Common Mistakes
- Meet The Street
- Tell a Story
- The Platonic Ideal
- 5 Years in the Wilderness – What to Do When Things Go Wrong
In the next post, I will start with some of the benefits of going public.