PR’s pivotal role in an IPO

A company can’t survive going public on earnings alone. A smart communications strategy—internal and external—can make or break the entire effort.

It’s the dream of many public relations professionals: Land a position with a promising pre-IPO company. Take less base compensation and sacrifice weekends and holidays for the promise of tapping into a gold vein of stock options and sailing off to the Caribbean following a robust IPO and the requisite vesting period.

Ah, if only it were that easy.

The reality is that the PR pro in a pre-IPO company has enormous pressure and responsibility to ensure that his/her organization is playing by the IPO communications rules of the road. The job can be like herding cats. A single communications misstep can be extremely costly to the organization and, of course, to communications leadership.

2013 is actually turning out to be a banner year for IPOs in the U.S. According to the czars of IPO research at Renaissance Capital, 165 IPOs have priced so far this year—that’s a nearly 50 percent increase over 2012. In addition, a whopping 208 IPOs have been filed with the SEC year to date, more than 75 percent than a year prior, and the average IPO has returned almost 30 percent from the offer price.

Twitter, as the galaxy is aware, is expected to complete its IPO process before the end of the year, possibly by Thanksgiving. Its recent decision to fuel the IPO frenzy is having a significant and positive impact on other recent IPOs as well, like Rocket Fuel and FireEye. Their stock prices have doubled since their IPOs less than a month ago.

Going public has many pluses. Among the benefits is the opportunity to garner significantly more interest and coverage from business and financial information channels, major newspapers, business magazines, television, radio, financial and business websites, among other media outlets.

However, the benefits of enhanced publicity come with the increased responsibility of communicating appropriately, leveraging newfound media attention to support strategic business goals while playing by fair market rules and maintaining corporate transparency.

Much of this enormous responsibility falls squarely on the shoulders of the organization’s communications leadership. Remember the companies in the boom that screwed up their IPOs by inadvertently leaking confidential information that found its way to the media and then the SEC? That’s a surefire way for the dream to become a nightmare of epic proportions.

Here are a few guidelines for PR pros and their pre-IPO companies that will help dreams come true:

1. Prevent official and unofficial spokespeople from telling external sources your company intends to go public. Regardless of when it’s said, it can be published during the IPO quiet period and will look like SEC rules have been violated. Instead, focus on the company’s growth story. Talk about financing as an adjunct that facilitates growth.

2. Develop a story that describes your company’s competitive advantages and barriers to entry without industry jargon. Keep it simple and do it well in advance of the IPO, as it will serve as the basis for your corporate description in the prospectus.

3. Strengthen your website. During the quiet period, your company website will speak for you to industry influencers and potential investors.

4. Be visible now or company attorneys may say “no” after you have filed. If you haven’t been active before the filing, it will be difficult to be active once you have filed. Even if you have been active with the media before the filing, many attorneys will take an ultra-conservative position and still try to prevent the company from being visible. Challenge their position by sharing the many examples of companies who had their cake and ate it, too.

5. Stay visible. Typically, visible IPOs price higher in the range and trade higher afterward. Don’t focus only on The Wall Street Journal and other national publications. Industry trade publications, bloggers, industry and Wall Street analysts are also excellent visibility creators.

6. Once your company has gone public, employees have no right to material information before other shareholders. Make sure your company employees understand the rules. Be prepared to circulate policies that explain how to handle material information and how to avoid insider trading.

7. IPO day is the beginning, not the end, of communications. Use the remainder of your quiet period to plan your debut as a public company. Decide what your publicity stance will be on the first day of trading.

8. The first nine months of being public will prove whether you can properly forecast your future for Wall Street. It’s easier to keep your good reputation than to rebuild it.

9. Look to bellwether companies outside your industry, and not only to your competitors, for best communications practices.

10. Work with your company’s attorneys and advisers to fit your desired business strategy within regulatory rules.

11. Get your corporate legal and investor relations teams involved in social media to protect the company from violating disclosure requirements. The risks simply don’t outweigh the benefits.

Oh, and good luck.

A version of this article originally appeared on Jim Barbagallo’s blog.

A version of this story first appeared on the author’s blog, What It Takes.


PR Daily News Feed

Sign up to receive the latest articles from PR Daily directly in your inbox.