At a time when companies are fighting for survival and markets are depressed, it may seem a little odd to be writing about stock exchange listings (IPOs), but bear with me.
It is Manchester United’s recent bungled IPO that sparked my interest. The owners of Man U have been travelling the world looking for gullible (sorry, I mean willing) investors in the company’s shares. They went to Hong Kong, then Singapore and were told where to go, eventually succeeding in New York but at a much reduced valuation. Investors are not stupid.
The mistake that Man U has made — and which many other companies make on a regular basis — is taking their future investors for granted. Too often companies believe that they can just turn up at an investor roadshow, pitch their business plan and leave with a cheque. IPOs are the lifeblood of the corporate world. They allow successful private companies to raise external finance to fuel growth plans by tapping into the public markets. IPOs give companies prestige and profile and they help attract high-quality personnel with the allure of share options. IPOs also help to retain and motivate top employees.
However, since Lehmans collapsed in 2007 and a spate of high-profile listings ended up destroying shareholder value, the market door for new stock exchange entrants in most developed counties as been slammed shut. So, what can companies do? They need to start planning for public life at least two or three years in advance. Even though the markets look impenetrable, investors are always looking for high quality companies and when windows appear it is essential to be prepared. They need to refine their investment story, build a public media profile to breed familiarity and demonstrate progress, stress test any tricky issues, and address potential investors concerns before they become problems. Firms need to start acting like a public company before they can convince investors they are fit to become one. The sooner this process is stared, the higher chance a company will have of achieving a successful listing.
Marc Cohen is Senior Vice President, FTI Consulting Strategic Communications