A- I can understand your reservations about going public in general, let alone listing in London. However, at the core of your question appears to be the need to decide when to go public. I can truly say that many small public companies trading today would have been better served had they delayed their ambitions to go public and instead focused on growing their businesses and achieving a level of awareness that would enable them to truly capitalize on an IPO. Instead, they went public too early and are floundering in a sea of relative obscurity when they should have just stayed private in the first place.
As for listing on Aim, that decision is less of a geographic matter and more of a regulatory one these days for many US companies. Sure, it can help you get some more awareness overseas and may be a good fit depending on what industry you are operating in, but in the end, the true allure of that exchange is its less restrictive regulatory environment. This, coupled with lower underwriting fees and increased market depth, is taking much of the IPO market overseas at the moment.
Q- I’ve just been hired as the IRO for a company about three months out from an IPO. The bankers promise they’ll stack the book with solid, long-term investors, but I’m worried they’ll market to institutions that will just flip and run.Meanwhile, our company has thousands of loyal customers who are generally high-net-worth investor types. I’m interested in some kind of directed share program to build a strong retail investor base, but the bankers say these investors are just as likely to flip as anyone. Should we use an institutional or retail strategy for our IPO?
A- Unfortunately, a fair amount of flipping is inevitable with many IPOs today, regardless of whether you’ve got mainly institutional or high-net-worth retail ownership. History has shown that directed share programs and other attempts to make shares in an IPO readily available to retail investors through a Dutch auction process are problematic, regardless of how noble the intention. Whether it’s a ‘let our customers benefit from our success’ attitude or an ‘individual investors will hold longer rather than flip’ perception, the reality is that there is no optimal retail strategy for an IPO.
Keep the flippers in mind as you build your IR strategy. Have a proactive program in place and ready to go when you get out of the post-IPO quiet period.
E-mail questions to [email protected]. Hulus is senior vice president of New York-based IR and PR firm Makovsky & Company.
