The Initial Public Offering (IPO) process will be both lengthy and time-consuming for any private company that commits to it. Numerous tasks must be completed and several boxes ticked before becoming a publicly traded entity, with one of the most important steps along the way being the roadshow.
To say that an IPO roadshow is “important” doesn’t begin to capture its full significance. The reality is that a well organized and executed roadshow could give you a massive leg-up in terms of making your flotation a success. However, the opposite is also true – a roadshow that doesn’t see you put your best foot forward will most likely not energize the investment community and could doom your IPO long before the first bell rings on flotation day.
The stakes are that high. Getting it wrong isn’t an option. The IPO roadshow must be a success if your flotation is to get off the ground. An excellent roadshow doesn’t guarantee success, but a so-so or ineffective roadshow will severely undermine your prospects and, worst case scenario, might force you to consider pressing the pause button on your IPO or even pulling the plug entirely.
So, why does it matter so much and what is involved?
First things first, the IPO roadshow is a huge step in the process, but it’s not the first link in the chain. Before you get to the point of planning your roadshow, you will first of all need to choose an underwriter (usually an investment bank) to support you along the way – among the key reasons for working with underwriters are their experience in putting together roadshows and their contacts among the investor community – and then complete the required due diligence (an assessment of your financial situation and potential risks associated with your business going public). Once those two items on the “to do” list have been dealt with, then your focus can turn to working with the underwriters to plan your IPO roadshow.
What is an IPO roadshow?
Put as plainly as possible, the roadshow is a series of events designed to give the underwriting firm and key executives in your company the opportunity to make sales presentations to potential investors at a number of different locations. This run of events will play out over several days and may be spread across a number of weeks.
How does the roadshow work?
The purpose of the exercise is to generate buzz and interest in your flotation among the investor community and to turn that into a desire on their part to buy into your company. This “face time” is what gives you the opportunity to wow potential investors with your rationale for going public and plans for the future. Whether or not you make the most of that opportunity can have a massive bearing on how your IPO journey will play out. It is broadly accepted that the level of impact you generate with your roadshow will correlate strongly with the level of participation you generate – high impact is linked with high participation, low impact is linked with… well, do I really need to finish this sentence?
What does the roadshow involve?
Different companies may tweak the format in places, but there are certain core elements that will be common to all roadshows, including:
- Time is allocated to introducing the company and its top executives to the investor audience.
- The history of the company, its performance, and the competitive landscape in its industry will all be highlighted.
- Future plans are made clear.
- The details of the offer are presented.
- Typically, presentations take place face-to-face, though online roadshow events have become more popular since the onset of the pandemic in 2020.
- A question-and-answer session will be held after a presentation, giving potential investors the opportunity to engage directly with company executives about matters related to the business.
What do investors want?
What information will investors typically be looking for at a roadshow? Among the key points they will expect to see addressed are:
- Company background and history
- Details on the key company executives
- How the business perceives its own sense of vision and mission
- Future plans and objectives
- Current financial performance, as well as details on how the business has fared in the past
- Future expectations on growth
- Indications on the IPO stock price target
- What the company hopes to achieve from going public
What comes after the roadshow?
After the roadshow, the company will create the final IPO prospectus. This document will include a definitive position on the price of the offering. Where that price is set will in large part be determined by the level of interest and enthusiasm generated by the roadshow. Remember what we said above: high impact is linked with high participation, and that, in turn, will impact directly upon your offering price.
Want to learn more?
As outlined above, the roadshow is a crucial part of the IPO journey. Get it right and you significantly boost your chances of success, fail to make the most of the opportunity and it will seriously undermine your efforts. It should go without saying that one of those outcomes is desirable and one to be avoided at all costs. Call Global Shares today to speak with our expert team who are waiting to guide you through the process.