Sunday, January 22, 2017

Pearls of Wisdom from CFOs at the NYSE IPO Bootcamp 1/2017

In return for their time, the audience founders and management teams in attendance at The 2017 NYSE IPO Summit, held in January 2017 at the New York Stock Exchange heard an enormous download of first-hand, practical and useful advice about how to approach the IPO market. The advice came from a panel of accomplished CFOs who had recently been through the process. This august group included Michael Fleisher CFO of Wayfair, Peter Campbell CFO of Mimecast and John Gavin CFO of Acacia, all who offered the following words of wisdom to Leslie, the moderator and to the assembled crowd.  We think these tips are well worth repeating.  Paraphrasing the best we can, we repeat here the most important suggestions for all those of you considering the move to the public markets.

On IPO Timing

Don’t wait until the company is certainly ready. The fact is that  “You will never be 100% ready”--  but the same instincts and skill set that helped the company grow to the point where it has the opportunity to operate as a public company will get your team through the process.

On How to Prepare 

Know that: 
The role of the CFO in the process is critical. It is the CFO’s time to shine as a leader within the company.  

How to optimize the process – the details do matter.

  • Surround yourself with experts that you can trust and who have only the issuers’ best interests in mind.        
  • Reach out to others who have been through the process. Almost everyone is happy to talk and offer advice on lessons learned.  Pick up the phone and call.
  • Build a strong FP&A team and hire a controller with public company experience if you can. Be prepared to pay whatever it takes; these roles are critical to the success of a public company CFO.
  • Be pragmatic but do not listen to everything the lawyers and bankers say. Remember that they are oriented towards zero risk.  A strong IPO and aftermarket requires that companies accept some uncertainty.  That is the nature of public markets.
  • Have conversations about board transition and identify candidates early so your company can conduct a controlled and well planned transition to a public company board. Some of your early investors will want/need to step off the board and equally importantly, public boards require different skills and experience than private boards.
  • Communicate with employees about what a public stock price means and explain before it happens that the stock prices go both up and down. Remind the entire company that they key to economic success is a focus on the long term business not this month’s stock price gyrations.
  • For the founder who want to retain control, dual-class stock is worthy of consideration. The bankers generally are not initially supportive of implementing this structure but, if your rational is thoughtful and sensible, and if the tiers are structured reasonably, dual-class can be an important tool to allow the company to focus on the long term, not always on this quarter.
  •  Be actively involved in deciding who your shareholders will be. Do not leave this decision only to the banks.
  • Hire a talented, smart person to do the internal IR role and make it a training ground for leadership roles within the organization.
  • Go into the IPO process with the clear belief that publicly reporting is not going to change your business decisions—management needs to maintain a long term view which may not be best for the current quarter.  Be prepared to deal with that.
  • Do not put too much focus or weight on the IPO price, it is just a day. It is more important to get the best group of investors than it is to grab the last dollar.

Finally, having a publicly traded stock is not for everyone. 

There are pros and cons to being public but for those solid enough to earn the right to be public, there are many more pros – perhaps most importantly that your company remains in control of its own destiny.  Furthermore, an IPO:

  • Provides liquidity for long-time investors and employees.
  • Is an potent tool for attracting talent.
  • Can accelerate business growth, not only from increased awareness but also by reinvigorating our leaders and employees. 
  • Is a major branding event

These are just a few of the tips that can help distinguish a “completed IPO” from a “successful IPO”.  The former can be achieved by many. The latter applies to a more rarified group.  We at Class V Group stand ready to help companies understand the differences as and land in the latter class.