Day one, new job, New York Palace, 5.30 am, early December. I am a mere IR director (not as in board of), only one rung above my former consultant status, about to be baptized by fire into the corporate hierarchy. The CEO, CFO, two senior VPs, three investment bankers and me. This is the roadshow for the last IPO of the 20th century, the largest communications offering of the year, and the second largest telecoms IPO in history. I have convinced my new bosses I belong on the roadshow… I’m having second thoughts…
I presented a sound argument for inclusion. Once the deal was done, the bankers would disappear and IR would transfer to me. On the roadshow I would meet future investors, and they’d meet their future contact. Furthermore, my presence would signal that management took IR seriously, that it had someone in place with access to executives.
I wasn’t on the initial invitation list. Investment bankers have not traditionally welcomed IROs onto roadshows. In fact, underwriters are roadshow control freaks, striving to maintain a firm grip on the management team and the message. An ‘outside’ communications professional threatens the balance of power in this critical equation.
Without prior insight into the regulatory environment for an IPO, management teams must rely on what bankers tell them. The presence of an experienced IRO on the roadshow injects reality into the process. ‘When you’re in Europe, you have much more leeway to talk about the numbers than you do in the US,’ one of the bankers unabashedly told our CEO. ‘You can make projections there that you can’t here.’ Yet relying on such advice could have been disastrous.
The long-term consequences of the initial message and target audience should be as important to a forward-thinking investment banker as the short-term necessity of selling the deal. After all, the IPO is just the beginning, and a smooth transition to good disclosure practice shows a company has the discipline and foresight to merit its public status.
The fact that I was standing there that cold December morning was an indication of how far IR has come. And, frankly, investment bankers are warming to the idea of bonding with IR. Our roadshow was arranged by meeting planners – people who connect companies with institutions. Like IROs, they use institutional databases to target prospects; they create briefing books for management; and they attend every meeting, making introductions. Yet they know nothing of our tight-knit community and Niri, and have rarely cracked an issue of this magazine.
I was determined to change all that. Stamina would be key. On paper, it was an exciting prospect. New York for a day, then Europe, the east coast, the Midwest and my new home state, California. In all, we’d visit two dozen cities before ringing the bell at the NYSE on December 15.
Woody Allen says that 99 percent of life is just showing up. This is particularly true during the roadshow. We were all there, but the second limo was not. After years of being the one responsible for logistics, I was thankful that, for once, the agenda was not my own.
The one car was too small for the team and I was thrust into the arms of our new management team as we lurched onto Madison Avenue. Already our team was weary. This was, for them, the culmination of months of grueling preparation.
Our co-lead underwriters presented an uncomfortable tension. No two banking houses really work well together. In this testosteronic world, it was all about who was to blame for the glitch of the day. After our breakfast with one crew, we were swept off to a videoconference set up by the other, a small group meeting, and a luncheon of almost 200. Two one-on-ones followed before we were off to the airport for a late-afternoon flight to Germany. Upon arrival, we had an hour at an airport hotel to freshen up before 14 hours of meetings.
From the lobby of a Frankfurt hotel two days later, I saw a young couple dragging a Christmas tree across the snowy square. Inside, the holiday had no relevance, save for the fact that the hard-driving bankers were anxious to wrap up before the middle of the month, for fear that their families might – once and for all – finally disown them.
By then I was starting to build empathy for these folks, despite telling myself that they made in a month what I made in a year. Still, to thrive as an underwriter, one must forfeit family time, sacrifice one’s liver, take up bawdy behavior, and, apparently, abandon gym membership.
Musical chairs
As I squeezed into the private jet taking us to our next stop, the stewardess whispered in my ear, ‘That’s the CEO’s seat.’ When an IRO is in a limo or a private jet, he is rarely able to enjoy the experience. On the roadshow, no executive suite, no gourmet meal can be enjoyed amidst the stress. It’s like an extended wilderness survival weekend, or like taking the Orient Express knowing you’re heading for derailment.
Even our flight on Concorde at week’s end was anticlimactic. I was a rookie. Across the aisle our CFO snored away. On the other side of him, our CEO, in a blank-eyed mask and ear plugs, seemed to be recharging his Energizers. Fate had placed the opposing investment bankers beside one another.
On the plane back to Los Angeles, legs twitching, too tired to sleep, I watched Austin Powers wide-eyed. No time to waste, as early the next morning I was to attend a ribbon-cutting ceremony for our new headquarters building. Within ten days I would have to be up and running – as an IR department. As yet we had no IR web site, no process for press releases, no investor packets, no master plan.
After a two-day working weekend, it was back to New York for the domestic portion of the roadshow. By lunch the first day, I was ready to throw in the towel. Investor faces began to melt into each other. I could predict the jokes and inflections in the presentation. Still, we trudged on. I was getting an invaluable understanding of how management told the story. Listening to the questions gave me insight into what the initial defining issues would be.
Management was sending another message by having me along. Forced to carve out a new program from scratch, I was using every means possible to navigate the upper echelons of the company. I had to ramp up quickly, and were I not in the same car as the CEO, this would have been impossible. It’s amazing how quickly decisions can be made when you’re seated near the fountainhead. This sent a clear message: IR would have a high profile.
In the past, IROs were rarely chosen until after the IPO. I had the advantage of these three weeks of pre-IPO preparation, but I could have used three months. The ideal time to bring an IRO on board is as soon as you register with the SEC. As to whether to choose someone from within or without, our management felt it was important to show that a transformation was taking place. Nothing rocks the boat like a new hire.
My advice to IROs who find themselves on an IPO roadshow? Keep your mouth shut; you’re here to learn. Collect business cards for your database. Don’t expect follow-up from the underwriters. Don’t try and change the story during the roadshow. Make sure you thank people. If, in your heart, you feel you aren’t needed, don’t show up. Oh, and don’t sit in the CEO’s seat on a private jet.
Morgan Molthrop is director of IR at Infonet Services Corp
