tag:blogger.com,1999:blog-84526247827095957742024-03-12T18:16:44.190-07:00Insiders' Practical Observations (IPOs)Our attempt to distinguish the myths and nonsense from the realities of the IPO marketplace, based on many years of first hand experience.
No promises on the regularity of postsClass V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-8452624782709595774.post-5062589710297563642023-10-02T11:40:00.003-07:002023-10-07T16:44:58.979-07:00Bill Ackman has it right<p><span face="Arial, sans-serif" style="font-size: 14.6667px; white-space-collapse: preserve;"><b>Let us begin with two important notes:</b></span></p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p><span face="Arial, sans-serif" style="font-size: 14.6667px; white-space-collapse: preserve;">1) We really dislike SPACS. By design, the structure puts money in the hands of sponsors and third party advisors and generally leaves the merged company with an underfunded treasury and not much of a clue as to how to operate in the public arena. It is no surprise at all that most of those who chose what was pitched as an easier way to go public and completed their SPAC mergers are now swamp things, mired in single digit muck, left to flounder by an uninterested investment community.</span></p><p><span face="Arial, sans-serif" style="font-size: 14.6667px; white-space-collapse: preserve;">2) We have no economic or other involvement with Pershing Square or anyone who works there.</span></p></blockquote><span><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">With that out of the way, <b>we do love helpful innovation.</b></span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">On Friday 9/29 Pershing Square received SEC approval for a newly designed “son of SPAC” product called a SPARC. (</span><a href="https://www.sec.gov/Archives/edgar/data/1895582/000119312523247555/d305814d424b3.htm" style="text-decoration-line: none;"><span face="Arial, sans-serif" style="color: #1155cc; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; text-decoration-line: underline; text-decoration-skip-ink: none; vertical-align: baseline; white-space-collapse: preserve;">https://www.sec.gov/Archives/edgar/data/1895582/000119312523247555/d305814d424b3.htm</span></a><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">)</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">For a very small subset of very special companies with a particular goal for a public offering, we believe this structure is among the most company-friendly, investor rational process improvements to come around in a long time. (“Among” because for many, the hybrid auction structure still has enormous advantages but that’s a different column.)</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">From an investor perspective, the SPAC approach of “give us your money now, to invest in something or other over the next two years, and oh yes, you can have it back, possibly with some warrants if it doesn’t work out” is as clever as going to the track and putting it all on a jockey with no steed, or betting on the favorite at the Kentucky Derby. You might possibly get lucky and make a little money, but the risk/reward relationship makes little sense. Even if you do come out in the money, presumably those returns are certainly not what your fund investors, the ones paying your salaries, had in mind when they entrusted their capital to you. And in an environment where short term CDs pay ~5% and have close to zero associated risk, well, something about a bridge for sale comes to mind.</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">The SPARC structure is very different. Investors receive a right to buy shares at the same price as the sponsor, in this case funds from historically successful Pershing Square, once they know what the target company is. Rather than of holding their collective noses and jumping in, investors can actually see that the pool not only has water but that the temperature and chlorine levels are to their liking. Don’t like it? Don’t invest; the look cost you nothing. Do like it? Ok, see what the valuation looks like after a brief exploratory trading period and then make the call. Really like it? Buy just as you would on the open market with any new issue. Huge incremental knowledge shifts the balance of power to the investor.</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">From the perspective of the company to be acquired (CtbA) this structure also offers many pluses, albeit a few reasons to pause. Starting with the pluses: The (CtbA) receives a real, meaningful, (not less than $250M, up to $3.5B) not instantly redeemable, deposit in the treasury account. The size of the investment ensures that the investor (in this case Pershing) will have to care about the ongoing health of the company in the aftermarket as at that size, the position can’t easily be flipped. That's not Pershing's style anyway. With no sponsor “promote” and the time value of the due diligence required before the investment, a quick flip = a lousy ROI. Therefore, right from the start, the company has a key, committed, aligned, long-term investor not unlike what it would have with a strategic private placement. But wait, there’s more: the investment isn’t a private placement as other shares in the company will trade in the open market allowing both employees and other investors the full range of daily trading opportunities. </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">The other key element of the transaction is the price and on this, there are two perspectives. For some, avoiding the slings and arrows of daily market swings and bounces, and the comfort of locking in a price with a committed investor with other investor friends in high places, will likely be very, very appealing. Certainty can be really helpful as, for starters, knowing what will be in the treasury not only reduces stress but also can be super helpful to the budgeting process. On the other hand, some managements and boards may believe that market enthusiasm will result in a higher valuation; it’s risk/reward thing. Those believing the open market will pay more may choose to pass. As mentioned earlier, this structure is for certain companies with certain goals. Some may want certainty; some may want market pricing. The beauty is the company Pershing pursues will likely be savvy enough to have the option to decide either way.</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">There are numerous other details that make this structure worth a look for the few that qualify. We believe that SPARCs indeed solve almost all of the things we hate about SPACS, elements that honestly were problems for both issuers and public investors. Only the 3</span><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"><span style="font-size: 0.6em; vertical-align: super;">rd</span></span><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> parties were winners in most cases. That said, the one challenge that remains with the SPARC structure is readiness. It is one thing to go public, via whatever structure. It is quite another to operate successfully as a public company. Too many looked at SPACs as a “get in the water fast” opportunity and then discovered that without having put in the effort to develop into strong swimmers, meaning thorough pre-listing preparation, it was a quick trip to the bottom of the pool. Pre-IPO prep is incredibly important, regardless of the listing approach. Everything from smoothing out the quarter close process, to installing the right planning systems, to fully explaining to employees what it means to be a public company and much more, will matter once public, regardless of listing approach.</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">Still, as long-time critics of SPACs and in many cases Direct Listings, which benefit third party sellers more than issuers, a SPARC strike us as a genuinely thoughtful, fair, wicked-clever innovation that merits a close look by the subset of issuers for which it was designed. </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"><br /></span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Arial, sans-serif" style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;">Hooray for Pareto Optimal innovation.</span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><p dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"> </span></p><div><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-variant-position: normal; vertical-align: baseline; white-space-collapse: preserve;"><br /></span></div></span>Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-1602214785061797772023-04-24T07:00:00.009-07:002023-04-24T07:00:00.209-07:00Words of Wisdom from Leslie's CFO panel at the 10th Annual IPO Summit<p> <span> </span><span style="font-family: Arial; font-size: 11pt; white-space: pre-wrap;">On April 17, 2023, Class V Group co-hosted the 10th Annual IPO Summit at the NYSE attended by hundreds of private company founders, CEOs and CFOs. At that event Leslie moderated a discussion entitled “CFO Leadership in Times of Uncertainty” featuring Tricia Tolivar, CFO of CAVA and John Rucker, CFO of Arcadia. Below are a few insightful takeaways from that event.</span></p><span id="docs-internal-guid-c8a63a13-7fff-d907-ee1f-e4b396f6aed8"><br /><ol style="text-align: left;"><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Uncertainty is the new normal.</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> It is important to have a clear mission.The mission should be the North Star of the organization in times of uncertainty and for the CFO, to be the steadying force. Develop a strong 3 to 5 year mission-driven plan and 12 month rolling tactical plans. Stay agile and communicate, communicate, communicate. Develop clear KPIs for workstream owners.</span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Do not expect a magical period of calm</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> in which you will have time to focus on maturing the organization and developing public company readiness. You should be doing both simultaneously, operating the business and actively maturing the organization. Almost everything you need to do to operate successfully in the public markets, you will want to do anyway to build a sustainable/thriving/enduring business, whether an IPO window opens up or not. </span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">It takes time to become IPO ready.</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> Pick a date 18 to 24 months in the future and work back. Develop a multi functional work plan that includes each part of the organization that will have a role. In addition to finance and legal this includes HR, IT, Comms and more. Start with your data. A sound data strategy is critical to public company readiness. </span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Expensive top down IPO readiness assessments may not be the best place to start for most young organizations.</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> We prefer more tactical focused assessments with subject matter experts as partners who can not only help assess a technical area but can also provide tactical, affordable resources to help your team learn and remediate.</span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Build knowledge within your organization</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">, Do as much of the tactical readiness work as you possibly can in house because that knowledge will be critical to your success once public. Bring in advisors to support your organization's learning so that your team is strong and ready. An advisor should act like a personal trainer, helping you develop the internal discipline and muscle to succeed as a public company.</span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Hire an experienced independent advisor to help you develop and execute your cross departmental IPO readiness plan and project.</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 400; vertical-align: baseline; white-space: pre-wrap;"> Some advisors are focused just on the transaction or investor relations. The best advisors provide senior level attention and get in the trenches with management and their teams building public company know-how..The right advisor can help you avoid costly mistakes on the path to readiness and should be 100% independent, working for the company and company only. Beware of advisors who get paid by your bankers, if they are paid like bankers they will operate like bankers.</span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">A CFO should be ready to step up to lead the company through the IPO process to take your company public.</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> If you are the right financial operations leader for your business you can be the CFO who takes the company public. Let your chosen advisor help you navigate what you do not know.</span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Be Prepared</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. Emerging growth companies are held to a public company standard as soon as the meetings with bankers and public investors begin. Work to develop relationships and a track record of delivering before you go public but make sure your story is crisp and clear. Be confident that your organization is ready to deliver before you step out on the stage. </span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">Bring your board along for the journey</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. Visibility and delivering by successfully leading the public company readiness process underpins support. Your board can be tremendously helpful during the IPO process and you can learn from their experience, but at the end of the day, your team must call the shots. You will have to live with the outcomes. </span></p></li><li aria-level="1" dir="ltr" style="font-family: Arial; font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; list-style-type: decimal; vertical-align: baseline; white-space: pre;"><p dir="ltr" role="presentation" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;"><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; font-weight: 700; vertical-align: baseline; white-space: pre-wrap;">The Panel Projects that the IPO window opens later this year</span><span style="font-size: 11pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">. At the Summit, our panelists painted an optimistic outlook for the IPO market citing signs the market is healing and potentially opening in the back half of this year. For example they saw block trades and marketed follow-on offerings coming back at increasingly narrow discounts indicating investor appetite for new issuance is recovering.</span></p></li></ol></span><span></span>Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-71699663085175960282023-03-20T09:00:00.008-07:002023-03-20T12:32:44.682-07:00From the Ashes of Disaster Grow the Roses of Success<p><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">(</span><span face="Calibri, sans-serif" style="font-size: 10.5pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Song from the 1968 film Chitty Chitty Bang Bang, based on Ian Fleming’s novel by the same name)</span></p><span id="docs-internal-guid-505fec80-7fff-dfcd-a515-455bd941f50d"><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; white-space: pre-wrap;">No question, there are some ashes of disaster in the Silicon Valley Bank debacle. 8500+ people at various SVB entities are currently uncertain about their jobs and livelihoods, and sadly not at all uncertain about the value of their equity. From every perspective the collapse of the Silicon Valley Bank, to put it mildly, is a very sad, very disruptive, just plain awful occurrence.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">However, sticking with song titles, this is not the end of the world as we know it. Many of those employees will recover under the bank’s eventual ownership structure, whatever that will be. Others will be snapped up by competitors trying to get a better handle on the magic that made SVB so important for so long. The companies that carefully saved money in deposit accounts at SVB, rather than say on an ego-trip Super Bowl ad, will find other places to stow that cash. In all likelihood, it is only the bank’s management that may well be cooked and, from everything we know so far, perhaps deservedly so.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">But is this the end of Silicon Valley and ecosystem that spawns and grows innovative companies? Perhaps, the end of the county’s biggest engine of economic growth? That is surface-level thinking. This is a big miserable bucket of cold water on the undeniably overheated economy that prevailed in start-up land until early last year. When there is too much money in too many funds thrown with too much enthusiasm at too many companies, the timing is uncertain, the catalyst unknown, but the ending is a forgone conclusion and not a pretty one. </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">However, the thing about being doused in a bucket of ice water is that after a good shake, it’s not that hard to warm up and dry off. Just wait and see. So shake off the panic, take a deep breath and look around. </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">As many have stated for years and with clear evidence, this is not 2000, a time when, for many companies, behind the fancy website and astronomical valuation, there was no there there. Many of those internet darlings had optimistic slide decks and fancy-logoed t-shirts but not much (or anything) in the way of a sustainable business. Contrast that with today when many still well-funded private entities have real products and services that real customers want. These companies offer solutions to actual problems and therefore, compelling opportunities ahead. For them, even before the SVB debacle, the sushi was already gone from the lunchrooms. With the swoon in technology stocks, came an abrupt change in message from the boardroom from “Grow, grow, grow” to “Cut those expenses and aim for profitability ASAP”, a 180 that involves plenty of friction. Painful ? Yes but do-able and in process. Thanks to piles of cash raised in 2021, many have the runway to pull it off.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">So we can check the first box. The ecosystem has spawned real products from real companies with enough resources to button up operations and soldier on. Unfortunately, the challenge isn’t just about what can be controlled by the finance department. Young company teams aren’t slaying a serpent, they are dealing with a Hydra. Specifically, while scrambling to adjust their operating M.O., these businesses also must contend with the incremental angst of ongoing macroeconomic uncertainty. In this environment, it is very difficult for long established companies to read the tea leaves and offer guidance with any accuracy. It is virtually impossible for younger businesses that have never been through one of these cycles to have a clue. Therefore, and quite correctly, many are being very, very cautious with their outlook for the next couple of quarters, hedging big-time on forecasts. Of course, what follows cautious forward-looking commentary from public company CFOs is, inevitably, lower stock prices. And these "value adjusted" companies? They are also known as “comps”.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">And that may prove to be the good news.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Macro uncertainty, a change in the focus of the operating model, dramatically reduced valuations may not appear to aggregate into compelling catalysts for the re-emergence of an active IPO market. Appearances can be deceiving.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Until the SVB uh – event – many, not all but many, management teams and boards at private companies already at scale were content to rest on their balance sheets and proclaim the IPO simply won’t happen while valuations are wallowing beneath the sub-flooring. Stout treasury accounts and a renewed focus on cautious spending suggested that approach would work. Plenty of conversations this past 6 months that went like this: “Tighten up the P&L, heads down </span><span face="Calibri, sans-serif" style="color: #2b00fe; font-size: 12pt; font-style: italic; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">and when valuations come back</span><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">, we will hit the public markets full speed ahead and bound for glory.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">But that was then.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Everything changed last week when that virtual bucket – no tank - of ice water landed on the collective head of the Silicon Valley ecosystem (which by the way, is not geographically restricted to the west coast but rather every state that has any sort of entrepreneurial economy). </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Suddenly, the meaning of the old saw “hope is not a strategy” is painfully and irrefutably clear. </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">·</span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span class="Apple-tab-span" style="white-space: pre;"> </span></span><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The easy money is gone - for most</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">·</span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span class="Apple-tab-span" style="white-space: pre;"> </span></span><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The relatively inexpensive lines of credit for “just in case” just got a lot more expensive and harder to land.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">·</span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span class="Apple-tab-span" style="white-space: pre;"> </span></span><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The venture funds, so recently at-the-ready to fund every AI (or other) entrepreneur knocking at the door as they scrambled to find opportunities to disperse the oversized funds they raised, have concurrently opted to yank back the reins. Don’t call us; we’ll call you.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-left: 36pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">·</span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-family: "Times New Roman"; font-size: 7pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><span class="Apple-tab-span" style="white-space: pre;"> </span></span><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The balance sheet that looked plenty strong enough suddenly looks less certain. The days of “What, Me Worry?” have been replaced by sleepless nights and badly gnawed fingernails.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-left: 18pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">The times, they are a changin’.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">But. but, but…… these are still real business with real opportunities. While growth may be slower, operating models for many are growing stronger. Talented employees are more likely to stay put and, given the substantial layoffs of Q1 2023, it’s just a bit easier to selectively add to the teams. These companies still want growth capital, solid balance sheets and liquidity. </span><span style="font-size: 12pt; white-space: pre-wrap;">Reiterating: companies are still looking for, and to some extent now driven, to find liquidity.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Welcome back to the IPO market. Q1, is about over and there was almost no IPO action. Q2 will be a time of continued adjustment and model re-alignment. By the time Q3 is over, many companies will have operating expenses under control, solid systems in place to measure outcomes from marketing, sales, engineering and overhead, a practiced ability to close quarters efficiently, and the painful recognition that stalling in hopes of attaining something near 2021’s valuation may be akin to sitting about waiting for a dude named Godot.</span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Some companies won’t get there from here. Plenty will. They will take this pretty-shocking SVB wake-up call to spiff up the engine, check the oil, study the course and get the right driver in the seat, ready to put that pedal down when the moment comes. About that timing…Will there be comfort about the direction of the economy and interest rates by Q3? Maybe. As 2024 will be an election year, it’s not unreasonable to assume the crystal ball will be less cloudy by then. </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">Will valuations have rebounded? Maybe some, but to previous levels? Nope. That shouldn’t matter. The thoughtful, well-prepared teams will likely recognize that going public isn’t just about the price on deal day. It’s about a fully liquid market, a message of on-going stability, an enhanced treasury account and the opportunity to earn, not hope, the way back to a more fulsome market cap. </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">How? Complete a smaller-than-originally-dreamed-of IPO, hit your forecasts, prove that yours is really a company, not a just a product or worse, a feature. Demonstrate to the throngs of institutional investors with too much cash on the sidelines today that the management team understands the responsibilities and frankly challenges of being public, and remind your employees that the stock goes up only if the business delivers. </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"> </span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;">You can’t win if you don’t show up and if you don’t get on the track, a competitor will take the pole position. Management teams, looking at you. Now is the time to put fuel in the tank and rev those engines. Class V can help. The IPO market is coming back sooner than you may expect. </span></p><div><span face="Calibri, sans-serif" style="font-size: 12pt; font-variant-alternates: normal; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div></span>Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-41298685115160285812017-01-22T21:32:00.000-08:002017-01-22T21:32:19.704-08:00Pearls of Wisdom from CFOs at the NYSE IPO Bootcamp 1/2017<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "times new roman";">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.<span style="mso-spacerun: yes;"> </span>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.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white; mso-outline-level: 1;">
<b><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">On IPO Timing</span></b><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">: <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; mso-outline-level: 1;">
<span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="background: white; color: #500050; font-family: "times new roman";">Don’t wait
until the company is certainly ready. The fact is that <span style="mso-spacerun: yes;"> </span>“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.<o:p></o:p></span></div>
<div class="MsoNormal" style="mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="background: white; color: #500050; font-family: "times new roman";"><br /></span></div>
<div class="MsoNormal" style="background: white; mso-outline-level: 1;">
<b><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">On How to Prepare</span></b><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";"> <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white; mso-outline-level: 1;">
<b><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">Know that: </span></b><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">The role of the CFO in
the process is critical. It is the CFO’s time to shine as a leader within the
company. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">How to optimize the
process – the details do matter.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="background: white; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";"><br /></span></b></div>
<div class="MsoNormal" style="mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
</div>
<ul>
<li>Surround
yourself with experts that you can trust and who have only the issuers’ best
interests in mind. </li>
<li>Reach
out to others who have been through the process. Almost everyone is happy to
talk and offer advice on lessons learned.<span style="background-color: white; color: #222222; font-family: "times new roman"; font-size: 12pt;">
</span><span style="background-color: white; color: #222222; font-family: "times new roman"; font-size: 12pt;">Pick up the phone and call.</span></li>
<li>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.</li>
<li>Be
pragmatic but do not listen to everything the lawyers and bankers say. Remember
that they are oriented towards zero risk.<span style="background-color: white; color: #222222; font-family: "times new roman"; font-size: 12pt;">
</span><span style="background-color: white; color: #222222; font-family: "times new roman"; font-size: 12pt;">A strong IPO and aftermarket requires that companies accept some
uncertainty. That is the nature of public markets.</span></li>
<li>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.</li>
<li>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.</li>
<li>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.</li>
<li> Be
actively involved in deciding who your shareholders will be. Do not leave this
decision only to the banks.</li>
<li>Hire
a talented, smart person to do the internal IR role and make it a training
ground for leadership roles within the organization.</li>
<li>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. <span style="background-color: white; color: #222222; font-family: "times new roman"; font-size: 12pt;"> </span><span style="background-color: white; color: #222222; font-family: "times new roman"; font-size: 12pt;">Be prepared to deal with that.</span></li>
<li>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.</li>
</ul>
<br />
<div class="MsoNormal" style="background: white; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "times new roman";">Finally, having a
publicly traded stock is not for everyone.<span style="mso-spacerun: yes;">
</span><o:p></o:p></span></b></div>
<div class="MsoNormal" style="background: white; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "times new roman";"><span style="mso-spacerun: yes;"><br /></span></span></b></div>
<div class="MsoNormal" style="background: white; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="font-family: "times" , "times new roman" , serif;">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.<span style="color: #222222;">
</span><span style="color: #222222;">Furthermore, an </span>IPO:</span></div>
<div class="MsoNormal" style="background: white; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="font-family: "times" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-left: .25in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
</div>
<ul>
<li><span style="font-family: "times" , "times new roman" , serif;">Provides liquidity for long-time investors and employees.</span></li>
<li><span style="font-family: "times" , "times new roman" , serif;">Is an potent tool for
attracting talent.</span></li>
<li><span style="font-family: "times" , "times new roman" , serif;">Can accelerate
business growth, not only from increased awareness but also by reinvigorating
our leaders and employees. </span></li>
<li><span style="font-family: "times" , "times new roman" , serif;">Is a major branding event</span></li>
</ul>
<br />
<div class="MsoNormal" style="background: white; margin-left: .25in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="font-family: "times" , "times new roman" , serif; font-size: 12pt;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-left: .25in; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
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<span style="color: #222222; font-family: "times new roman"; mso-fareast-font-family: "Times New Roman";">These are just a few of the tips that can help
distinguish a “completed IPO” from a “successful IPO”. <span style="mso-spacerun: yes;"> </span>The former can be achieved by many. The latter
applies to a more rarified group.<span style="mso-spacerun: yes;"> </span>We at
Class V Group stand ready to help companies understand the differences as and
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mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:DengXian;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
p.MsoListParagraph, li.MsoListParagraph, div.MsoListParagraph
{mso-style-priority:34;
mso-style-unhide:no;
mso-style-qformat:yes;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
mso-add-space:auto;
mso-pagination:widow-orphan;
font-size:12.0pt;
font-family:Calibri;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:DengXian;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
p.MsoListParagraphCxSpFirst, li.MsoListParagraphCxSpFirst, div.MsoListParagraphCxSpFirst
{mso-style-priority:34;
mso-style-unhide:no;
mso-style-qformat:yes;
mso-style-type:export-only;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
mso-add-space:auto;
mso-pagination:widow-orphan;
font-size:12.0pt;
font-family:Calibri;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:DengXian;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
p.MsoListParagraphCxSpMiddle, li.MsoListParagraphCxSpMiddle, div.MsoListParagraphCxSpMiddle
{mso-style-priority:34;
mso-style-unhide:no;
mso-style-qformat:yes;
mso-style-type:export-only;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
mso-add-space:auto;
mso-pagination:widow-orphan;
font-size:12.0pt;
font-family:Calibri;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:DengXian;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
p.MsoListParagraphCxSpLast, li.MsoListParagraphCxSpLast, div.MsoListParagraphCxSpLast
{mso-style-priority:34;
mso-style-unhide:no;
mso-style-qformat:yes;
mso-style-type:export-only;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
mso-add-space:auto;
mso-pagination:widow-orphan;
font-size:12.0pt;
font-family:Calibri;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:DengXian;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
.MsoChpDefault
{mso-style-type:export-only;
mso-default-props:yes;
font-family:Calibri;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:DengXian;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-bidi-font-family:"Times New Roman";
mso-bidi-theme-font:minor-bidi;}
@page WordSection1
{size:8.5in 11.0in;
margin:1.0in 1.0in 1.0in 1.0in;
mso-header-margin:.5in;
mso-footer-margin:.5in;
mso-paper-source:0;}
div.WordSection1
{page:WordSection1;}
/* List Definitions */
@list l0
{mso-list-id:1914967990;
mso-list-type:hybrid;
mso-list-template-ids:-770536346 67698689 67698691 67698693 67698689 67698691 67698693 67698689 67698691 67698693;}
@list l0:level1
{mso-level-number-format:bullet;
mso-level-text:;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:Symbol;}
@list l0:level2
{mso-level-number-format:bullet;
mso-level-text:o;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:"Courier New";}
@list l0:level3
{mso-level-number-format:bullet;
mso-level-text:;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:Wingdings;}
@list l0:level4
{mso-level-number-format:bullet;
mso-level-text:;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:Symbol;}
@list l0:level5
{mso-level-number-format:bullet;
mso-level-text:o;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:"Courier New";}
@list l0:level6
{mso-level-number-format:bullet;
mso-level-text:;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:Wingdings;}
@list l0:level7
{mso-level-number-format:bullet;
mso-level-text:;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:Symbol;}
@list l0:level8
{mso-level-number-format:bullet;
mso-level-text:o;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:"Courier New";}
@list l0:level9
{mso-level-number-format:bullet;
mso-level-text:;
mso-level-tab-stop:none;
mso-level-number-position:left;
text-indent:-.25in;
font-family:Wingdings;}
ol
{margin-bottom:0in;}
ul
{margin-bottom:0in;}
-->
</style><style>
<!--
/* Font Definitions */
@font-face
{font-family:<span class="goog-spellcheck-word" id=":df.15" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Arial</span>;
<span class="goog-spellcheck-word" id=":df.16" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">panose</span>-1:2 11 6 4 2 2 2 2 2 4;
<span class="goog-spellcheck-word" id=":df.17" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-<span class="goog-spellcheck-word" id=":df.18" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">charset</span>:0;
<span class="goog-spellcheck-word" id=":df.19" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-generic-font-family:auto;
<span class="goog-spellcheck-word" id=":df.20" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-pitch:variable;
<span class="goog-spellcheck-word" id=":df.21" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-signature:-536859905 -1073711037 9 0 511 0;}
@font-face
{font-family:"Courier New";
<span class="goog-spellcheck-word" id=":df.22" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">panose</span>-1:2 7 3 9 2 2 5 2 4 4;
<span class="goog-spellcheck-word" id=":df.23" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-<span class="goog-spellcheck-word" id=":df.24" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">charset</span>:0;
<span class="goog-spellcheck-word" id=":df.25" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-generic-font-family:auto;
<span class="goog-spellcheck-word" id=":df.26" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-pitch:variable;
<span class="goog-spellcheck-word" id=":df.27" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-signature:-536859905 -1073711037 9 0 511 0;}
@font-face
{font-family:Wingdings;
<span class="goog-spellcheck-word" id=":df.28" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">panose</span>-1:5 0 0 0 0 0 0 0 0 0;
<span class="goog-spellcheck-word" id=":df.29" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-<span class="goog-spellcheck-word" id=":df.30" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">charset</span>:2;
<span class="goog-spellcheck-word" id=":df.31" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-generic-font-family:auto;
<span class="goog-spellcheck-word" id=":df.32" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-pitch:variable;
<span class="goog-spellcheck-word" id=":df.33" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-signature:0 268435456 0 0 -2147483648 0;}
@font-face
{font-family:"<span class="goog-spellcheck-word" id=":df.34" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Cambria</span> Math";
<span class="goog-spellcheck-word" id=":df.35" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">panose</span>-1:2 4 5 3 5 4 6 3 2 4;
<span class="goog-spellcheck-word" id=":df.36" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-<span class="goog-spellcheck-word" id=":df.37" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">charset</span>:1;
<span class="goog-spellcheck-word" id=":df.38" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-generic-font-family:roman;
<span class="goog-spellcheck-word" id=":df.39" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-format:other;
<span class="goog-spellcheck-word" id=":df.40" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-pitch:variable;
<span class="goog-spellcheck-word" id=":df.41" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-signature:0 0 0 0 0 0;}
@font-face
{font-family:<span class="goog-spellcheck-word" id=":df.42" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.43" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">panose</span>-1:2 1 6 0 3 1 1 1 1 1;
<span class="goog-spellcheck-word" id=":df.44" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-<span class="goog-spellcheck-word" id=":df.45" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">charset</span>:134;
<span class="goog-spellcheck-word" id=":df.46" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-generic-font-family:auto;
<span class="goog-spellcheck-word" id=":df.47" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-pitch:variable;
<span class="goog-spellcheck-word" id=":df.48" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-signature:-1610612033 953122042 22 0 262159 0;}
@font-face
{font-family:<span class="goog-spellcheck-word" id=":df.49" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.50" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">panose</span>-1:2 15 5 2 2 2 4 3 2 4;
<span class="goog-spellcheck-word" id=":df.51" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-<span class="goog-spellcheck-word" id=":df.52" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">charset</span>:0;
<span class="goog-spellcheck-word" id=":df.53" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-generic-font-family:auto;
<span class="goog-spellcheck-word" id=":df.54" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-pitch:variable;
<span class="goog-spellcheck-word" id=":df.55" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-font-signature:-536870145 1073786111 1 0 415 0;}
/* Style Definitions */
p.<span class="goog-spellcheck-word" id=":df.56" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoNormal</span>, <span class="goog-spellcheck-word" id=":df.57" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">li</span>.<span class="goog-spellcheck-word" id=":df.58" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoNormal</span>, div.<span class="goog-spellcheck-word" id=":df.59" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoNormal</span>
{<span class="goog-spellcheck-word" id=":df.60" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.61" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">unhide</span>:no;
<span class="goog-spellcheck-word" id=":df.62" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.63" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">qformat</span>:yes;
<span class="goog-spellcheck-word" id=":df.64" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-parent:"";
margin:0in;
margin-bottom:.0001pt;
<span class="goog-spellcheck-word" id=":df.65" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-pagination:widow-orphan;
font-size:12.0pt;
font-family:<span class="goog-spellcheck-word" id=":df.66" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.67" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.68" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-font-family:<span class="goog-spellcheck-word" id=":df.69" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.70" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.71" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.74" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.75" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.76" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-font-family:<span class="goog-spellcheck-word" id=":df.77" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.78" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.79" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.82" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>;
<span class="goog-spellcheck-word" id=":df.83" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.84" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-font-family:<span class="goog-spellcheck-word" id=":df.85" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.86" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.87" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.90" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.91" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.92" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-font-family:"Times New Roman";
<span class="goog-spellcheck-word" id=":df.95" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.96" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.99" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>;}
p.<span class="goog-spellcheck-word" id=":df.100" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraph</span>, <span class="goog-spellcheck-word" id=":df.101" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">li</span>.<span class="goog-spellcheck-word" id=":df.102" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraph</span>, div.<span class="goog-spellcheck-word" id=":df.103" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraph</span>
{<span class="goog-spellcheck-word" id=":df.104" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-priority:34;
<span class="goog-spellcheck-word" id=":df.107" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.108" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">unhide</span>:no;
<span class="goog-spellcheck-word" id=":df.109" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.110" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">qformat</span>:yes;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
<span class="goog-spellcheck-word" id=":df.114" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-add-space:auto;
<span class="goog-spellcheck-word" id=":df.117" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-pagination:widow-orphan;
font-size:12.0pt;
font-family:<span class="goog-spellcheck-word" id=":df.118" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.119" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.120" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-font-family:<span class="goog-spellcheck-word" id=":df.121" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.122" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.123" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.126" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.127" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.128" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-font-family:<span class="goog-spellcheck-word" id=":df.129" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.130" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.131" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.134" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>;
<span class="goog-spellcheck-word" id=":df.135" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.136" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-font-family:<span class="goog-spellcheck-word" id=":df.137" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.138" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.139" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.142" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.143" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.144" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-font-family:"Times New Roman";
<span class="goog-spellcheck-word" id=":df.147" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.148" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.151" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>;}
p.<span class="goog-spellcheck-word" id=":df.152" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpFirst</span>, <span class="goog-spellcheck-word" id=":df.153" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">li</span>.<span class="goog-spellcheck-word" id=":df.154" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpFirst</span>, div.<span class="goog-spellcheck-word" id=":df.155" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpFirst</span>
{<span class="goog-spellcheck-word" id=":df.156" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-priority:34;
<span class="goog-spellcheck-word" id=":df.159" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.160" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">unhide</span>:no;
<span class="goog-spellcheck-word" id=":df.161" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.162" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">qformat</span>:yes;
<span class="goog-spellcheck-word" id=":df.163" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-type:export-only;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
<span class="goog-spellcheck-word" id=":df.169" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-add-space:auto;
<span class="goog-spellcheck-word" id=":df.172" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-pagination:widow-orphan;
font-size:12.0pt;
font-family:<span class="goog-spellcheck-word" id=":df.173" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.174" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.175" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-font-family:<span class="goog-spellcheck-word" id=":df.176" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.177" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.178" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.181" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.182" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.183" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-font-family:<span class="goog-spellcheck-word" id=":df.184" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.185" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.186" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.189" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>;
<span class="goog-spellcheck-word" id=":df.190" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.191" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-font-family:<span class="goog-spellcheck-word" id=":df.192" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.193" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.194" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.197" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.198" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.199" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-font-family:"Times New Roman";
<span class="goog-spellcheck-word" id=":df.202" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.203" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.206" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>;}
p.<span class="goog-spellcheck-word" id=":df.207" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpMiddle</span>, <span class="goog-spellcheck-word" id=":df.208" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">li</span>.<span class="goog-spellcheck-word" id=":df.209" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpMiddle</span>, div.<span class="goog-spellcheck-word" id=":df.210" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpMiddle</span>
{<span class="goog-spellcheck-word" id=":df.211" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-priority:34;
<span class="goog-spellcheck-word" id=":df.214" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.215" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">unhide</span>:no;
<span class="goog-spellcheck-word" id=":df.216" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.217" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">qformat</span>:yes;
<span class="goog-spellcheck-word" id=":df.218" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-type:export-only;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
<span class="goog-spellcheck-word" id=":df.224" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-add-space:auto;
<span class="goog-spellcheck-word" id=":df.227" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-pagination:widow-orphan;
font-size:12.0pt;
font-family:<span class="goog-spellcheck-word" id=":df.228" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.229" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.230" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-font-family:<span class="goog-spellcheck-word" id=":df.231" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.232" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.233" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.236" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.237" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.238" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-font-family:<span class="goog-spellcheck-word" id=":df.239" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.240" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.241" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.244" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>;
<span class="goog-spellcheck-word" id=":df.245" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.246" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-font-family:<span class="goog-spellcheck-word" id=":df.247" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.248" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.249" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.252" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.253" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.254" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-font-family:"Times New Roman";
<span class="goog-spellcheck-word" id=":df.257" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.258" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.261" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>;}
p.<span class="goog-spellcheck-word" id=":df.262" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpLast</span>, <span class="goog-spellcheck-word" id=":df.263" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">li</span>.<span class="goog-spellcheck-word" id=":df.264" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpLast</span>, div.<span class="goog-spellcheck-word" id=":df.265" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoListParagraphCxSpLast</span>
{<span class="goog-spellcheck-word" id=":df.266" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-priority:34;
<span class="goog-spellcheck-word" id=":df.269" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.270" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">unhide</span>:no;
<span class="goog-spellcheck-word" id=":df.271" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-<span class="goog-spellcheck-word" id=":df.272" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">qformat</span>:yes;
<span class="goog-spellcheck-word" id=":df.273" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-type:export-only;
margin-top:0in;
margin-right:0in;
margin-bottom:0in;
margin-left:.5in;
margin-bottom:.0001pt;
<span class="goog-spellcheck-word" id=":df.279" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-add-space:auto;
<span class="goog-spellcheck-word" id=":df.282" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-pagination:widow-orphan;
font-size:12.0pt;
font-family:<span class="goog-spellcheck-word" id=":df.283" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.284" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.285" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-font-family:<span class="goog-spellcheck-word" id=":df.286" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.287" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.288" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.291" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.292" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.293" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-font-family:<span class="goog-spellcheck-word" id=":df.294" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.295" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.296" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.299" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>;
<span class="goog-spellcheck-word" id=":df.300" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.301" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-font-family:<span class="goog-spellcheck-word" id=":df.302" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.303" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.304" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.307" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.308" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.309" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-font-family:"Times New Roman";
<span class="goog-spellcheck-word" id=":df.312" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.313" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.316" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">bidi</span>;}
.<span class="goog-spellcheck-word" id=":df.317" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">MsoChpDefault</span>
{<span class="goog-spellcheck-word" id=":df.318" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-style-type:export-only;
<span class="goog-spellcheck-word" id=":df.321" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-default-props:yes;
font-family:<span class="goog-spellcheck-word" id=":df.324" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.325" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.326" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-font-family:<span class="goog-spellcheck-word" id=":df.327" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
<span class="goog-spellcheck-word" id=":df.328" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.329" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">ascii</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.332" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">latin</span>;
<span class="goog-spellcheck-word" id=":df.333" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.334" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-font-family:<span class="goog-spellcheck-word" id=":df.335" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">DengXian</span>;
<span class="goog-spellcheck-word" id=":df.336" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.337" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>-theme-font:minor-<span class="goog-spellcheck-word" id=":df.340" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">fareast</span>;
<span class="goog-spellcheck-word" id=":df.341" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">mso</span>-<span class="goog-spellcheck-word" id=":df.342" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">hansi</span>-font-family:<span class="goog-spellcheck-word" id=":df.343" tabindex="-1" role="menuitem" aria-haspopup="true" style="background: yellow;">Calibri</span>;
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</style>Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-30925023199917077492017-01-03T12:02:00.001-08:002017-01-04T17:43:31.625-08:002016 IPOs - Actually, it was a Terrific Year....<div class="MsoNormal">
If you are sensible, you enjoyed the holidays fully and
stayed far away from the business sections of most newspapers or websites.<span style="mso-spacerun: yes;"> </span>If on the other hand, you are a creature of
habit or discipline and wanted to keep in touch with the world beyond fruitcake
and wassail, you undoubtedly read numerous stories about what a terrible year 2016
was for IPOs.<span style="mso-spacerun: yes;"> </span>To be specific, a Google
search on the words “2016 IPO” and” Terrible” returns <i style="mso-bidi-font-style: normal;">5.1 million</i> results.<span style="mso-spacerun: yes;"> </span>If only
that were true.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Was it a bad year? Well, that depends on what side of the
equation you are on.<span style="mso-spacerun: yes;"> </span>For those who make
a living based on the volume or size of deals done: the bankers, lawyers,
accountants, IR firms etc, there is no arguing with the oft repeated data. It
was a lousy year as the tech IPO count was down 30+% from the paltry numbers in
2015.<span style="mso-spacerun: yes;"> </span>No question; the volume guys had a
tough year.<span style="mso-spacerun: yes;"> </span>But is that really the best
way to measure the IPO market?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
What about the investors; the people who invest in and in
many cases hold on to the securities of these new issuers?<span style="mso-spacerun: yes;"> </span>You remember them, the portfolio managers who
take the risk associated with new issues on behalf of the school teachers,
individual investors, pension funds etc. that make up the mutual fund industry,
still the bulk of institutional equity investment dollars and the biggest
buyers of IPOs. Is it possible these folks might have a very different perspective
on the definition of a “good” or “bad” IPO year?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Investors who participated in the tech IPO market this year had
21 bites at the apple according to Renaissance Capital. Had they been brave
enough to sink their teeth in all 21 times, they would have owned a basket of
stocks that finished the year 39.8% above where they debuted.<span style="mso-spacerun: yes;"> </span>For those keeping track, that is more than 5 times the returns on the NASDAQ composite index, which finished the year up a very
healthy 7.5%.<span style="mso-spacerun: yes;"> </span>There’s not a long-only
portfolio manager or a shareholder on the planet who would call that
performance anything other than knock-the-cover-off-ball fabulous.<span style="mso-spacerun: yes;"> </span>(And here, I must add that we at Class V
Group, we were very pleased to be a part of several of the standouts).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Names like Acacia, Twilio, Impinj, TheTradeDesk, Apptio and Nutanix
among others took on the challenge, sailed over the hurdles in the process and
not only completed strong IPOs but also delivered solid earnings reports in
subsequent quarters.<span style="mso-spacerun: yes;"> </span>Assuredly some hit
their annual high price point in the days immediately after the IPO but those
prices are determined by enthusiastic (and not always rational) investors. For
those who participated in the IPO itself, or waited for the issues to settle
after the first few weeks, the gains were tangible and provided a very sweet
return. We at Class V Group were delighted to work with some of these big winners.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Just for fun, let’s compare that to 2014, an IPO year that the business press at the
time called "hot", "strong" “the best year for IPOs since 2000”.<span style="mso-spacerun: yes;"> </span>In that year, there were 45 tech IPOs, with
the biggest – and still the largest tech IPO of all time, Alibaba.<span style="mso-spacerun: yes;"> </span>By the end of that year, four of the 10
largest were already trading below their opening price. Among those trading up
at year end were names like Lending Club and GoPro, which were both off to fast
starts but unfortunately have since run into buzz saws.<span style="mso-spacerun: yes;"> </span>2014 may have been a “banner” year for those
who look at volume, but for those who invest, not so much. <span style="mso-spacerun: yes;"> </span>Obviously the 2016 class will face future challenges
too, every IPO class does, but as the year closed, 9 out of 10 were in
black-ink territory.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
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Name="Body Text First Indent"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text First Indent 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Heading"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text Indent 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text Indent 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Block Text"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Hyperlink"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="FollowedHyperlink"/>
<w:LsdException Locked="false" Priority="22" QFormat="true" Name="Strong"/>
<w:LsdException Locked="false" Priority="20" QFormat="true" Name="Emphasis"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Document Map"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Plain Text"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="E-mail Signature"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Top of Form"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Bottom of Form"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Normal (Web)"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Acronym"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Address"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Cite"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Code"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Definition"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Keyboard"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Preformatted"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Sample"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Typewriter"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Variable"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Normal Table"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="annotation subject"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="No List"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Outline List 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Outline List 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Outline List 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Simple 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Simple 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Simple 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Colorful 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Colorful 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Colorful 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 6"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 7"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 8"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 6"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 7"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 8"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table 3D effects 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table 3D effects 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table 3D effects 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Contemporary"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Elegant"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Professional"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Subtle 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Subtle 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Web 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Web 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Web 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Balloon Text"/>
<w:LsdException Locked="false" Priority="39" Name="Table Grid"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Theme"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 6"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 7"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 8"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Level 9"/>
<w:LsdException Locked="false" SemiHidden="true" Name="Placeholder Text"/>
<w:LsdException Locked="false" Priority="1" QFormat="true" Name="No Spacing"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading"/>
<w:LsdException Locked="false" Priority="61" Name="Light List"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 1"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 1"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 1"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 1"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 1"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 1"/>
<w:LsdException Locked="false" SemiHidden="true" Name="Revision"/>
<w:LsdException Locked="false" Priority="34" QFormat="true"
Name="List Paragraph"/>
<w:LsdException Locked="false" Priority="29" QFormat="true" Name="Quote"/>
<w:LsdException Locked="false" Priority="30" QFormat="true"
Name="Intense Quote"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 1"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 1"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 1"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 1"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 1"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 1"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 1"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 1"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 2"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 2"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 2"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 2"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 2"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 2"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 2"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 2"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 2"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 2"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 2"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 2"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 2"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 2"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 3"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 3"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 3"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 3"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 3"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 3"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 3"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 3"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 3"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 3"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 3"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 3"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 3"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 3"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 4"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 4"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 4"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 4"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 4"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 4"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 4"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 4"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 4"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 4"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 4"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 4"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 4"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 4"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 5"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 5"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 5"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 5"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 5"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 5"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 5"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 5"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 5"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 5"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 5"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 5"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 5"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 5"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 6"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 6"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 6"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 6"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 6"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 6"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 6"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 6"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 6"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 6"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 6"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 6"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 6"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 6"/>
<w:LsdException Locked="false" Priority="19" QFormat="true"
Name="Subtle Emphasis"/>
<w:LsdException Locked="false" Priority="21" QFormat="true"
Name="Intense Emphasis"/>
<w:LsdException Locked="false" Priority="31" QFormat="true"
Name="Subtle Reference"/>
<w:LsdException Locked="false" Priority="32" QFormat="true"
Name="Intense Reference"/>
<w:LsdException Locked="false" Priority="33" QFormat="true" Name="Book Title"/>
<w:LsdException Locked="false" Priority="37" SemiHidden="true"
UnhideWhenUsed="true" Name="Bibliography"/>
<w:LsdException Locked="false" Priority="39" SemiHidden="true"
UnhideWhenUsed="true" QFormat="true" Name="TOC Heading"/>
<w:LsdException Locked="false" Priority="41" Name="Plain Table 1"/>
<w:LsdException Locked="false" Priority="42" Name="Plain Table 2"/>
<w:LsdException Locked="false" Priority="43" Name="Plain Table 3"/>
<w:LsdException Locked="false" Priority="44" Name="Plain Table 4"/>
<w:LsdException Locked="false" Priority="45" Name="Plain Table 5"/>
<w:LsdException Locked="false" Priority="40" Name="Grid Table Light"/>
<w:LsdException Locked="false" Priority="46" Name="Grid Table 1 Light"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark"/>
<w:LsdException Locked="false" Priority="51" Name="Grid Table 6 Colorful"/>
<w:LsdException Locked="false" Priority="52" Name="Grid Table 7 Colorful"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 1"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 1"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 1"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 1"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 1"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 2"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 2"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 2"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 2"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 2"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 3"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 3"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 3"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 3"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 3"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 4"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 4"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 4"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 4"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 4"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 4"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 4"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 5"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 5"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 5"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 5"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 5"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 5"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 5"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 6"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 6"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 6"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 6"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 6"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 6"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 6"/>
<w:LsdException Locked="false" Priority="46" Name="List Table 1 Light"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark"/>
<w:LsdException Locked="false" Priority="51" Name="List Table 6 Colorful"/>
<w:LsdException Locked="false" Priority="52" Name="List Table 7 Colorful"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 1"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 1"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 1"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 1"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 1"/>
<w:LsdException Locked="false" Priority="51"
Name="List Table 6 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="52"
Name="List Table 7 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 2"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 2"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 2"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 2"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 2"/>
<w:LsdException Locked="false" Priority="51"
Name="List Table 6 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="52"
Name="List Table 7 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 3"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 3"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 3"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 3"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 3"/>
<w:LsdException Locked="false" Priority="51"
Name="List Table 6 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="52"
Name="List Table 7 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 4"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 4"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 4"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 4"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 4"/>
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<div class="MsoNormal">
Will 2017 be better?<span style="mso-spacerun: yes;">
</span>Pretty tough to beat those nearly 40% returns so who knows? On the other
hand, the returns on those served up in 2016 will no doubt bring investors back
to the table to see what’s on the menu this year.<span style="mso-spacerun: yes;"> </span>Assuming the valuations are in line with some
sort of fundamental reason and the stories are told crisply and clearly – oh
and assuming macro-economic headwinds don’t interfere - 2017 could be one of
those years where the volume counters and the investors both win.<span style="mso-spacerun: yes;"> </span>Here’s hoping.<o:p></o:p></div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-39637824187605630472016-05-10T14:50:00.002-07:002016-05-10T15:05:11.157-07:00Perspectives on the IPO from Recently Public Company Founders and Management Teams; It was Tough but Being Public is Well Worth it!<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">As quiet as it has been, we have no doubt that the IPO
market will be back.<span style="mso-spacerun: yes;"> </span>As we have said
before, we need a company or two with good numbers and brave management to
break the ice. SecureWorks [SCWX, NASDAQ] <span style="mso-spacerun: yes;"> </span>doesn’t really count as it was a spin-out from
a larger entity not an A-round-to-IPO-story. But one of these days, some company on file
will convince “oh no, let someone else go first” bankers to hit the
road(show), take the plunge and bring back the IPO.<span style="mso-spacerun: yes;"> </span>Yes for some, that may be a challenging call as they are likely to have to accept the new catch phrase “An IPO –
It’s the new down round”. The sky-high private valuations on more than a few
will have to face the cold-hard reality of a discerning public
marketplace that is unwilling to "price for perfection" right out of the gate.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">But no need to dwell on those tough details here because
whether we see the transaction in 2016 or beyond, 100 or so private company
management teams recently joined us at the New York Stock Exchange to learn
about the markets, what it takes to go public and what steps they might take
now to make the process easier “then.”<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Leslie moderated a panel of recently public company
management teams including Peter Bauer, the Founder, CEO and Chairman of
Mimecast, Jennifer Moyer the CFO of Alarm.com and Matt Kaminer the General
Counsel of Instructure. The hope was to share the hard-earned wisdom of those
who had recently gone through process with those for whom the experience is yet
to come.<span style="mso-spacerun: yes;"> </span>The overriding message from
those who have run the gauntlet to those thinking about it: “It’s tough but
well worth it”.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Below, a straightforward summary of the questions and
answers from that panel: These are not our thoughts; they are the words of
wisdom from the panelists.</span><span style="color: #500050; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">What was the single best thing about
the IPO process?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">The single best thing about an IPO is the pride and morale
lift across the entire company. The feeling that we are good enough to be
playing in the big league has been a huge confidence builder. I was worried
about the stock price being a distraction but internally I spend very little
time on that as employees are focused on execution and have taken a long term
view.</span><span style="color: #500050; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">What factored into your decision to
peruse and IPO?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">First, the transparency of being a public company is a big
advantage when selling to enterprise customers and establishing partnerships.
The IPO can be quite a positive event for the company from that perspective. There
is a tremendous amount or publicity and awareness that can benefit any company
really and we were shown how to optimize the process.</span> <span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">So the IPO was the right thing to do for the business at the
right time for the company.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Second, investors expect a path to liquidity—if
management/founders want to maintain control over the destiny of the company an
IPO is the only way that keeps the management team in the driver’s seat. Other
alternatives-- Sale you lose control and become part of a bigger animal and a
PE deal is similar you cede control as they cut growth investment and bring in
their own management. If you believe in the long term potential of your company
and IPO is the only viable declaration of independence.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">How has the IPO process changed your company?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">There is a lot on compliance and legal stuff involved in an
IPO but at the core, a large portion of the work makes you a stronger company.
We had to focus on separation of duties, process, clear lines of communication
and accountability, on accuracy, removing risk, forecasting and planning. The
IPO process tightens everything up. It is great to lead a company that has gone
through a transition to a public company. We have a more finely honed ability
to execute. What used to be best efforts is now and intensely analyzed and high
conviction yes or no.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">What would you do differently if you
had it to do over again?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">The one thing I would do differently is the have dual class
stock to keep the focus of the company on the long term. The public markets
seem to be irrational at times and although we have put all the protections in
place like poison pill and staggered boards, dual class stock would provide and
extra piece of mind that the focus will remain on long term value
creation.</span><span style="color: #500050; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">As a CFO the one thing I would do differently is to have an
in house investor relations function from right from the IPO day rather than
outsourced IR. The biggest surprise to me has been how little public investors
actually know about the company and the time and effort involved in educating
them. We chose an outsourced solution just for convenience at the time. A
focused internal investor’s relations function is something I would have
invested in earlier.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">What tip would you give the audience on
how to prepare?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Spend time with public investors and research analysts well
in advance of the IPO to educate them on the company and learn from them is
incredibly valuable. That said, make sure your company presentation is public
company ready and that management is prepared well for the interaction.
Investors will take notes and remember everything you said so pivoting later is
difficult and a bad initial impression can lead to a rejection at time of IPO.
Make sure you are very well prepared.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Spend time with bankers but not too much time. There is
value in getting multiple perspectives; they are super smart. Don’t be blinded
by big brands, there were some who didn’t get it or who were too busy to give
us attention.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">What are the keys to success?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">You must set conservative expectations and outperform them. The
ability to beat and raise is very important and takes tremendous practice; setting expectations correctly is an art. As a management team we were coached to think
of the cadence of quarterly reporting like chapters in a book—it is your story
playing out on a quarterly basis and each quarter must show some evidence that
your story is working and working well.</span><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt; mso-outline-level: 1;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Do you need to have been a public
company CEO, CFO or GC to take a company public?</span></i></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="color: #222222; font-family: "arial"; font-size: 9.5pt;"><o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">A company does not need public company experience to
successfully navigate the IPO process. More important is a passion and vision
for the business. Public investors like founder led businesses as long as the
founder has built a deep bench of surrounding experienced management teammates.
<span style="mso-spacerun: yes;"> </span>CFOs need good judgment, a deep grasp
of the financials and a hopefully, an affinity for talking about the business
with investors. The General Counsel needs to know how to build and lead a legal
department. Advisors including IPO experts, experienced legal and
accounting firms can provide the expertise needed to get through the IPO
process and to launch a successful post IPO public company strategy. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-hansi-font-family: Calibri;">Final advice from one of our founder/speakers: “do not limit
the company's potential because of your own doubts about your ability to be a
public company CEO. If it is in the best interest of your company it is
certainly something you can do".<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 8.0pt;">
Onward!</div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-32955487334812313482016-03-22T09:59:00.000-07:002016-03-23T08:53:17.274-07:00The IPO Market – First Quarter Showers May indeed bring Subsequent Flowers<div class="MsoNormal">
Until recently, rapidly growing technology start-ups, aspiring
to perhaps one day be public, seemed to embrace the old adage: <i>It takes money to make money</i>. When money
was readily available to finance growth as long as management could tell a good
story, start up after start up scrambled like four-year olds at an Easter egg
hunt to gather up as much as they could.
However, they may have been adhering to the wrong proverb. Perhaps the more appropriate wisdom came from
Thomas Jefferson: “Never spend your money before you have earned it”. We think it highly likely that over the next
few quarters, participants in the IPO market will have data to conclude which was better advice.</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Just six months ago, spending to grow, even if the positive unit
economics and cash flow were on the come requiring a leap (and a bound) of
faith, a young company’s management team appeared wise to pursue a competitive
moat based on scale, growing as fast as possible. Let the P
part of the P&L sort itself out over time.<span style="mso-spacerun: yes;"> </span>Damn the torpedoes; go for growth and scale funded
by enormous private fund-raising rounds. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Ah, but some of the key “sugar daddies”
didn't see the opportunity through quite the same lens.<span style="mso-spacerun: yes;"> </span>Public
markets did not sing from the same hymn book as their private market
brethren.<span style="mso-spacerun: yes;"> </span>In 2015, realized IPO
valuations did not reflect that same optimism for growing companies in big
markets with hefty losses.<span style="mso-spacerun: yes;"> </span>Companies
that successfully executed an IPO in 2015 often - as in close to 60% of the
time according to Renaissance Capital’s 2015 US IPO Review - saw their stocks quickly
tumble below issue, and now are living through the painful aftermath with employees,
partners, customers and board members.<span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-spacerun: yes;"><br /></span></div>
<div class="MsoNormal">
If it is true that misery loves company, then there is some
solace. According to the same Renaissance Capital analysis, if an investor bought
the entire IPO class in 2013 and held through 12/31 of that year, that portfolio
would have appreciated 40.8%.<span style="mso-spacerun: yes;"> </span>Had they
repeated the exercise in 2014, the gain would have been 21%.<span style="mso-spacerun: yes;"> </span>Had they followed that tried and true
strategy in 2015, those investors would have lost 2%, versus a 0.7% loss for
the S&P500 last year. Worse still and again according to Renaissance
Capital, had one invested in every VC backed tech IPO in 2014 and 2015, the
portfolio would have returned 7% by year-end 2015.<span style="mso-spacerun: yes;"> </span>Alas, if one had simply parked money in a
NASDAQ index fund, the gain during those two years would have been 20%. No
wonder many public investors went to the sidelines and participation in IPOs
narrowed dramatically as 2015 progressed.<o:p></o:p></div>
<div class="MsoNormal">
Fast forward early 2016. As lore has it, March, often a
robust IPO month, did indeed come in like a lion.<span style="mso-spacerun: yes;"> </span>Unfortunately, it was Cecil. The good news is
that while that poor beast is in permanent repose, the 2016 IPO market may yet
stretch, stir and awake from the long nap, refreshed, perhaps healthier and
ready to go.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Why the optimism in the face of no visible evidence? <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">First</b>, <b>the VIX is
falling</b>.<span style="mso-spacerun: yes;"> </span>Volatility is the enemy of the
IPO.<span style="mso-spacerun: yes;"> </span>When all equity positions look
risky, who needs to pile on the incremental challenge of unproven, statistically
likely to trip, always unpredictable new issues?<span style="mso-spacerun: yes;"> </span>Conversely, when the market chills a bit, and
the VIX falls as it has been doing each week since the beginning of February,
investors turn their attention from risk avoidance to incremental upside, a
mindset favoring IPOs.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Second</b>, <b>public equity
is looking increasingly compelling</b> if for no other reason than the private
funding environment has grown much more challenging. <span style="mso-spacerun: yes;"> </span>Companies relying on unending, generous access
to late stage equity to fund further growth are scrambling to come up with a
new game plan.<span style="mso-spacerun: yes;"> </span>Of course, many raised
enormous piles of cash while the getting was good and therefore have a robust bank
account. However, history suggests that when money flows freely, emerging
companies have a tendency to develop free-wheeling, slow to break habits that
eat through bank balances like termites through grandma’s back deck. When
private money is hard to come by, public money, even with inherent attached
obligations, looks increasingly appealing.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Third, </b><b>Last
year’s “growth, at any cost, is good” mentality has given way</b> to that old
bugaboo, insistence on potential profitability. Public investors want to see proof not only of growing ongoing engagement from existing customers, a
sign that the offered product or service has convincing value, and therefore a reliable,
sustainable, expanding revenue base, but also a tangible demonstration of how
that revenue stream will someday yield positive free cash flow.<span style="mso-spacerun: yes;"> </span>Companies investing rationally in their
product roadmaps and in deepening integration with (and value to) customers,
will likely have a much easier time winning the hearts and minds of IPO
investors (when they come out from under their desks).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
When investors are fearful that private company secular
tailwinds will slow, leaving them becalmed in a big market with hungry shark
incumbents competing for the same, dwindling school of customers, the upstarts can only prevail if they offer something compelling, proprietary and
sustainable.<span style="mso-spacerun: yes;"> </span>As of March 2016, our
conversations with investors suggest that competitive barriers, an ability
to maintain a leadership position even in a long economic slog and a rational view of valuation are now more
critical to the investment decision than yesterday’s secular trends, fairies
and sugar plum TAMs. The market where “land-grab-today-at-any-cost-and
trust-we-can-monetize-this-big-opportunity-later” wins has left the room.
Conversely companies that embrace the mindset and work to deepen moats today while keeping spending under control should be well served when public
investors’ un-circle their wagons and again seek out new territory. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Our strong sense is that the uncertainty created by a
tighter private funding market is leading companies to rapidly embrace the
principles that public investors say they want, a more balanced approach
towards growth and profitability and a focus on moats and again, justifiable valuation expectations. Our optimism for the new
issue market ahead is based on our belief that this revised thinking will
result in stronger, more compelling IPO candidates.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So, once the clouds clear and a brave bellwether opens the
market, is it all clear skies and sunshine ahead?<span style="mso-spacerun: yes;"> </span>Of course not.<span style="mso-spacerun: yes;"> </span>Some companies will come to market with
models reminiscent of that FarSide cartoon mathematician “And then, a miracle
occurs”, and some of those IPOs will fly off the shelves.<span style="mso-spacerun: yes;"> </span>What happens to those companies after the
lock-up release 180 days later will be anyone’s guess.<span style="mso-spacerun: yes;"> </span>Having seen this movie before, we can say
that if history is any guide, emerging companies that are hunkered down in the
current environment, perhaps foregoing triple digit growth in the drive toward
the sustainability afforded by a viable model displaying balanced growth and
profitability, are the best bets. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The
current IPO forecast is gloomy; no doubt.
However, what is going on beneath the visible cloud cover just may be
enough to afford public investors positive returns again in the IPO pool when
the sun shines and it is time to dive back in.</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<o:p></o:p></div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-53266980025896656462016-02-07T22:45:00.000-08:002016-02-07T22:48:44.974-08:00Even the best fumble at times: Tips for handling an earnings miss<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">It’s been a rather bumpy earnings
season.<span style="mso-spacerun: yes;"> </span>Companies that made their
estimates and offered reasonably positive guidance fared well, at least on a relative basis.
Companies that hit their numbers but issued cautious forward-looking statements,
were crushed in the marketplace; see LNKD or DATA.<span style="mso-spacerun: yes;"> </span>Then there is MTCH, a company that missed top
line expectations first quarter out of the gate; that is a little like making a
Valentine’s Day reservation at a fine restaurant and failing to show up,
leaving your date sitting alone. You've created a memory that definitely isn’t
going away any time soon.<span style="mso-spacerun: yes;"> Like, ever.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">There is no way to insulate a stock
from market swings. Results that might be benign in one market are miserably
malignant in another. However, it is possible to minimize the damage, either in
scale or duration and so, in the middle of this “earnings season”, we thought
it might be useful to revisit some earnings release strategies.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Note
to Recent IPOs: DO NOT MISS. Really. DO NOT MISS<o:p></o:p></span></b></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">When investors take the risk of
investing in a new issue, an IPO, they have certain expectations about the “out
of the box” performance of that company. First, investors expect the company to
deliver results in-line or better than what the underwriting investment banks’
analysts forecast during the road show. It is no secret that analysts in the
underwriting group receive detailed guidance from management and while from
time to time an analyst will go rogue, in general the initial forecasts align
closely, albeit in a conservative way, with management’s own projections.<span style="mso-spacerun: yes;"> </span>A miss during the first 2 or 3 quarters
suggests management’s ability to forecast isn’t ready for prime time.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><span style="mso-spacerun: yes;"> </span><br />
In addition to hitting or beating analysts’ estimates, and really, “hitting” is
the same as missing as all IPO prospects are </span><b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">very</span></b><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> strongly
encouraged to launch with “in-the-bag” estimates, management of a newly public
company is also expected to follow a strategy matching the one discussed on the
IPO roadshow.<span style="mso-spacerun: yes;"> </span>Public investors are right
to expect that what they were sold on the IPO will closely resemble what will
be delivered in the aftermarket. <span style="mso-spacerun: yes;"> </span>Even
the smallest variation from the model originally communicated can send
investors racing for the exits and send the corresponding stock price into a
nosedive.<br />
<br />
Public investors are very different from VCs.<span style="mso-spacerun: yes;">
</span>Sometimes, VCs can be forgiving, at least for a quarter or two, when
something goes off track.<span style="mso-spacerun: yes;"> </span>Public
investors often will hit the eject button at the first sniff of an issue.
What’s’ the difference? VC investors sit on a just a few boards and often spend
years getting to know the details of their portfolio companies. This history allows
them to put a misstep in context and patiently wait for the correction.<span style="mso-spacerun: yes;"> </span>Well that and, generally, the investment is
illiquid and can’t be sold anyway, which is fine because <i style="mso-bidi-font-style: normal;">the VCs </i>investors are <i style="mso-bidi-font-style: normal;">locked
in for 10 years</i>. Contrast this with public investors who can concurrently
be responsible for as many as 250 stocks and rarely have the luxury of taking a
deep dive into the operations of the companies in their portfolios.<span style="mso-spacerun: yes;"> </span>While VC report cards are made public rarely
if ever, long-only fund managers see their grades in the papers or online every
single day and can/have to make buy/sell/hold decisions every hour of every
workday. When a newly public management team fails to deliver what was
promised, the preferred course of action for a fund manager is to utter unkind
things about the CEO and CFO, eject the stock from the portfolio and move along
investments run by more credible teams.<span style="mso-spacerun: yes;">
</span>As there really is no such thing as a one-quarter problem, this is
almost always the right move.<br />
<br />
And yet, sometimes, unexpected things do go bump in the night. When that
happens, there are a few moves to make to perhaps cushion the inevitable
fall.<span style="mso-spacerun: yes;"> </span>The damage is done. The key is to
regain credibility as quickly as possible.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br />
<span style="mso-spacerun: yes;"> </span>What follows are our suggestions.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoListParagraph" style="background: white; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: Arial; mso-fareast-font-family: Arial; mso-fareast-language: EN-US;"><span style="mso-list: Ignore;">1 </span></span><b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Acknowledge right up front that the report does not
match the forecast.</span></b><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> Take full responsibility for the misstep.<span style="mso-spacerun: yes;"> </span>Even if all the trains’ engines ran smoothly,
failure to anticipate the log that rolled onto the track was a management
blunder.<br />
<br />
Management’s only smart move is to provide as much detail and transparency as
possible (without exposing too much information to competitors, who will of
course dialed in to the mea culpa conference call. The key is to demonstrate
that the problem is well understood and the underlying issue identified. The
CEO and CFO should expect an unpleasant conference call on which investors will
ask very pointed questions. Management should be ready with detailed,
data-driven answers.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-left: .25in;">
<br /></div>
<div class="MsoListParagraph" style="background: white; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: Arial; mso-fareast-font-family: Arial; mso-fareast-language: EN-US;"><span style="mso-list: Ignore;">2 </span></span><b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Articulate a clear and credible plan to right the
ship.</span></b><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">
Management should talk through the steps to recovery, the timing with which
those steps can be implemented and a best guess as to how long it will take to
see tangible evidence of the effectiveness of those changes. The following
quarter’s earnings call is a very good time to tangible evidence of at least
some progress. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-left: .25in;">
<br /></div>
<div class="MsoListParagraph" style="background: white; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="color: #222222; font-family: "arial";"> <b>Demonstrate confidence in the plan.</b></span><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><span style="mso-spacerun: yes;"> </span>Investors don’t actually expect companies to
perform perfectly in perpetuity – there are zero examples of public companies
that have never missed a forecast. Management’s job is to turn the bug into a
feature, pull the team together and solve the problem. This is the time to show
the mettle of management and to earn long-term fans in the investment
community. It takes much more skill to sail a ship taking on water than to stay
the course in a boat with the wind at its back. At this point, a smart
management team will express confidence in the business, the team and the plan
to get things back on track, no matter how long that might take.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoListParagraph" style="background: white; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> Execute on the plan in the time frame communicated.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
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<span style="color: #222222; font-family: "arial"; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">[Here is our ad.]
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Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-11365781865049974632015-11-05T13:32:00.000-08:002015-11-05T13:32:12.495-08:00Leslie's thoughts on preparing for an IPO in what may be a tough market....<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b>What does the current IPO market look like to public
investors? </b> </span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">As of today the answer is
high risk and not so high reward. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Put yourself in the shoes of the institutional investor. Most
of my investor friends love the thrill of a new company in their portfolio, but
the unfortunate truth is that while the IPO is very important to the company
going public, it contributes very little to the average institutional
investor’s performance. To understand why you simply have to do the math. The T
Rowe Price New Horizons Fund has $ 14 billion under management. Even a generous
top 10 IPO allocation on a $ 100 mln IPO would hardly move the needle at less
than 1/20 of 1% of that portfolio of stocks. Since Institutional investors are
marked to market publicly every day, when markets are uncertain and stocks
volatile, they logically focus on the bigger existing stocks in their portfolio
that move the needle on a daily basis. Time leftover for IPOs becomes very small.
<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Another cloud hovering over the IPO investors’ heads today
is the poor performance of those brave few IPOs that have ventured out in
recent month.<span style="mso-spacerun: yes;"> </span>Investors have felt the
pain as 55% of IPOs since August are trading below issue with the average return
of just 2.9% from IPO.<span style="mso-spacerun: yes;"> </span>The good news is
that those returns are slightly better than the return on the S&P over the
same time period, but large institutional investors buy a majority of their
shares in the aftermarket where returns have been a negative 5%. Even bell
weather IPOs such as Ferrari and Pure Storage have broken issue. When a deal
heads south, the liquidity for that newly listed company dries up quickly.<span style="mso-spacerun: yes;"> </span>Many a fund manager has been caught with IPO positions
trading below issue, a situation that may attract the scorn of investors and the
consultants that recommend their funds. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">While there are a few promising signs including the major
indices moving back into positive territory for the year and the VIX (Wall
Street’s proxy for fear and uncertainty) coming back to earth after
skyrocketing in late August, the IPO market may be schizophrenic for some time
to come.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Challenging market not withstanding, as the calendar year
changes, we may see more companies heeding the advice offered by salesforce CEO
Mark Benioff at a recent Fortune Global Conference:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><span style="mso-spacerun: yes;"> </span>"Public markets
are great for CEOs. You have to answer to the public market. You have to listen.
You have to pay attention….. Entrepreneurs are making a huge mistake in waiting
too long to go public" <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">What lies ahead?<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Some smart companies will forge ahead although they may face
a discriminating and more crowded market given the number of potential IPOs
delaying in Q4. Those that want to maximize odds of potential success should
take a few key steps.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b>1) Have a compelling reason.</b><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">When markets are tough investors will want to know why a
company is moving ahead rather than waiting for calmer seas.<span style="mso-spacerun: yes;"> </span>Is it hubris, desperation or something more
rational? <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><span style="mso-spacerun: yes;"> </span>“Why do you want to be
a public company and why now?” will very likely be the first questions in your
roadshow meetings.<span style="mso-spacerun: yes;"> </span>Be very sure you are
clear on the answers to both and be equally sure that you can clearly
articulate the answers.<span style="mso-spacerun: yes;"> </span>Just a
suggestion but “Our burn rate is really high and our early investors want out”
is not likely to resonate well with public investors. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><span style="mso-spacerun: yes;"> </span>Conversely, if you
can explain how an investment today should accelerate the growth of your
business, give you a marketplace advantage and presumably lead to stronger
returns tomorrow, you will likely keep investors’ attention, at least long
enough to hear the rest of your story. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b><br /></b></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b>2) Demonstrate a credible roadmap to profitability.</b><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b><br /></b></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Surprise! Profitability matters after all.<span style="mso-spacerun: yes;"> </span>Expect public investors to be focused on your
path to profitability. When markets are sailing along smoothly and funds are
attracting new investment dollars (inflows), investors’ minds drift out the
risk curve. In good times, they are willing to pay high multiples on revenue
for growth, daring to dream that the rest will work itself out over time. In
uncertain times when volatility is up, inflows are stagnant or negative and IPO
returns down, investor focus turns to self-preservation and limiting downside
risk. The dare to dream valuation scenario goes poof when markets are falling.
Newly issued, track-record free stocks with valuations built on a dissolvable,
sugary rock candy mountain of imaginary profit and cash flow will be punished
the most.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">In these times, while current profitability may be optimal,
it may not be possible without throwing the growth plan into a tailspin. Having
a credible roadmap to profitability over the next 4 to 6 quarters, an
appropriate public investor time horizon, is the next best thing.<span style="mso-spacerun: yes;"> </span>Combine a path to profits with a compelling, sustainable
growth trajectory and you have meaningfully increased your odds of a successful
IPO. The IPO will look even more appealing if the numbers presented to
investors are on the upswing, meaning past any trough in Ebitda, with bankers’ profit
margin estimates showing consistent and tangible progress towards black ink.
Investors feel more confident when companies talking about levers to
profitability and can actually demonstrate that those levers work.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b>3) Set conservative expectations.</b><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Investors will want to see that you are conservative in the
public expectations you discuss for the business. One third of companies miss
analysts’ numbers by the second public quarterly report. <span style="mso-spacerun: yes;"> </span>Be clear about your expectations for the
business and what might be potential drivers of outperformance but be even
clearer about the challenges ahead. Don’t fail to acknowledge future head winds
and under play possible future tail winds. Savvy investors want management to
relay a conservative view of the world and then outperform against it. Bottom
line: set achievable expectations and communicate them clearly.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b><br /></b></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b>4) Raise money when you are comfortable, not desperate</b><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b><br /></b></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">If cash on your balance sheet is $13 million and you are
burning $ 15 million this quarter, you can bet investors will go for the
jugular. Institutional investors are master negotiators and if they see
weakness, they will show all the mercy of a great white circling a slow,
blubbery sea lion. To minimize their opportunity to extract more than a fair
discount, time an IPO so that your balance sheet shows comfort not necessity. You
would be well served to compliment that cushion with a credible path to
profitability that can be achieved <i style="mso-bidi-font-style: normal;">with
this round</i> of equity financing. Public investors do not want the guarantee of
future dilution or even worse, a subsequent inability to fund in uncertain
markets.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><span style="mso-spacerun: yes;"><br /></span></span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">What about those
hush-hush ratchets and triggers? Let's start with the fact that those
potentially costly and dilutive preferences are detailed in The S-1. Make no
mistake, institutional investors read that fine print. Not surprisingly, they
are never excited about paying direct deposits into the pockets of earlier
investors; there is a zero ROI for them on those dollars.<span style="mso-spacerun: yes;"> </span>Understand that they get the joke and will
factor those dilutive clauses into the price they are willing to pay for the
IPO. <span style="mso-spacerun: yes;"> </span>Savvy public investors will value
your IPO as if triggered. If it’s a tough market, work with your private
investors to make the problem clauses go away – or at least try. Hey, nothing
ventured….. Those companies that have horse-traded preferences in exchange for
high private company valuations, and those investors that have asked for them,
may need to compromise to get to the mutually beneficial goal of access to the
public capital markets. <o:p></o:p></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Understanding both the big picture and the nuances of the
IPO process can make an enormous difference in the outcome. Need more examples and suggestions? Get in
touch. Class V Group is laser focused on
helping great companies, and the inspiring entrepreneurs who build them, sail smoothly
and successfully into the public markets.</span><o:p></o:p></div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-90104255462018436702015-01-01T14:40:00.000-08:002015-01-02T15:33:30.658-08:00Are you REALLY ready to go public? A hopefully helpful guide to some key questions<br />
<br />
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<span style="font-family: Verdana, sans-serif;">2014 is in the books.
It’s been a pretty terrific year in the IPO market. According to Renaissance
Capital, through December 15, there have been 271 IPOs in the US this year, as
compared to 221 IPOs a year ago at this time, a volume increase of 23%.<span style="mso-spacerun: yes;"> </span>Thanks to Alibaba’s thunderlizard of a deal,
the dollars raised by IPOs this year $ 84.2 billion exceeds last year’s total
of $ 54.6 billion, by 54%%.<span style="mso-spacerun: yes;"> </span>Not bad<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">Ah, but look deeper and you will see that actually, roses
weren’t coming up everywhere. While 271 IPOs have been completed so far this
year, conservative estimates suggest that more than 350 companies filed S-1s, a
difference of nearly 30%.<span style="mso-spacerun: yes;"> </span>For every 3 deals
that filed and went public this year, at least one did the training, filed an
S-1 and didn’t make it to the starting line.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">Of course, we need to back out those companies that filed
late in the year, targeting a 2015 transaction.<span style="mso-spacerun: yes;">
</span>If we aggressively estimate that 20 fit that pattern, we still have more
than 50 that didn’t get the job done as planned. When you consider the time and
expense required for an initial filing, that is a big number.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: Verdana, sans-serif;">What’s the difference
and what price “Optionality”?<o:p></o:p></span></b></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">Bankers and others can be convincing when suggesting companies
take advantage of the relatively new option to file confidentially: “Get on
file now, then choose your timing later, but you’ll be ready.”<span style="mso-spacerun: yes;"> </span>Factually correct? Yes. Good for your
business, your P&L, your employees or your IPO? <span style="mso-spacerun: yes;"> </span>Not so fast. <span style="mso-spacerun: yes;"> </span>Preparing for an IPO too soon is neither a
cost nor risk free option.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">The on-going and elevated expense, distraction, loss of
momentum and sometimes embarrassment (Box anyone?) that accompany a premature
“go” decision can easily outweigh any timing flexibility benefits.<span style="mso-spacerun: yes;"> </span>Picture the horses as they are led into the
starting gate on Derby Day.<span style="mso-spacerun: yes;"> </span>There is a
reason they don’t load them until seconds before the bell.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Verdana, sans-serif;">OK, but IPOs do take
a long time. How do we know when to start?<o:p></o:p></span></b></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">At January board meetings, following the “year in review”
appraisals, many private company boards will have the “Is this the year to go?”
conversation. <span style="mso-spacerun: yes;"> </span>By “go”, we don’t mean
begin internal preparations. <span style="mso-spacerun: yes;"> </span>“Go” means schedule
a bakeoff and hire bankers.<span style="mso-spacerun: yes;"> </span>In advance
of those meetings, we offer 5 questions every board should ponder before dropping
the green flag. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoListParagraph" style="line-height: normal; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="font-size: 12.0pt; mso-bidi-font-family: Cambria; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">1.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;">Can your sales and financial teams accurately forecast
results for the next few quarters? Did you nail your forecasts last quarter?</b><span style="mso-spacerun: yes;"> </span>If answering
either of these is anything other than a rock solid “yes”, then take your time.
Public investors show no mercy to companies that miss an early quarter. <span style="mso-spacerun: yes;"> </span>Once you are in that doghouse, it’s a long
slow climb out. Worse still, the brickbats that will come your way courtesy of
angry investors are mere annoyances relative to the grenades your employees, customers
and partners may lob through your door if you miss an early public quarter.<span style="mso-spacerun: yes;"> </span>A swan-diving stock disappoints, creates instability
and begs questions about <span style="mso-spacerun: yes;"> </span>management’s
reliability. It just takes one miss. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoListParagraph" style="line-height: normal; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="font-size: 12.0pt; mso-bidi-font-family: Cambria; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">2.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;">Do you have the right team in place?<span style="mso-spacerun: yes;"> </span>No really, are you sure you have the right
team in place</b>, not just for the IPO
but also for the long term?<span style="mso-spacerun: yes;"> </span>Step back
and take a cold clear look.<span style="mso-spacerun: yes;"> </span>The team
that helped you get this far may be gifted, battle-tested and may be composed
of friends. That doesn’t mean it’s the team for a fast-growing public company. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Public
investors want to know that the C-suite in place for the IPO can scale the
organization. <span style="mso-spacerun: yes;"> </span>Newly public companies
juggle enough knives when adjusting to the market’s spotlight. <span style="mso-spacerun: yes;"> </span>There’s little bandwidth for concurrently
integrating new senior leaders.<span style="mso-spacerun: yes;"> </span>Save,
time money and aggravation; line up the ducks before, not during, the process.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="font-size: 12.0pt; mso-bidi-font-family: Cambria; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">3.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;">Is your business model stable and ready for public
scrutiny?<span style="mso-spacerun: yes;"> </span></b>Admittedly, there companies (ex. Twitter) where even
12 months post-IPO the model remains an enigma. We grant that if your business
has north of 200m active users, investors may cut you some slack.<span style="mso-spacerun: yes;"> </span>However, for most, a more stable model
correlates to a larger crowd of investors rallying around your IPO’s order book.
<span style="mso-spacerun: yes;"> </span>Are you hoping to migrate to a
subscription model? Do you see significant price changes or regulatory updates
on the near term horizon? Launch that new model or absorb the changes <i style="mso-bidi-font-style: normal;">before</i> you step on the IPO court. <span style="mso-spacerun: yes;"> </span>In the eyes of investors, a foot-fault of your
own making or because someone else moved the lines in a way you could have predicted,
will cripple your stock’s performance and likely your personal reputation for a
very long time.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background: white; margin-left: .5in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="color: black;"><span style="mso-list: Ignore;">4.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><b><span style="color: black;">Are<span class="apple-converted-space"> you ready </span>for an
intense audit?</span></b><span style="color: black;">
There isn’t even a close second. The reason most companies on the IPO trail get
thrown off course is because their audits aren’t ready on schedule. Audits won’t
be rushed. The drill down scrutiny on every last decimal point is much more
intense when your auditors know you’re preparing for an IPO. We recently
ran into<span class="apple-converted-space"> </span>IPO<span class="apple-converted-space">/</span> technical<u>-</u>accounting expert Barrett
Daniels, Managing Partner of<span class="apple-converted-space"> </span>Nextstep<u> </u>Advisory.
He put it this way:</span><span style="color: black;"> </span><span style="color: black;"><o:p></o:p></span></span></div>
<div style="background: white; margin-left: .5in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="color: black; font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background: white; margin-left: .75in;">
<span style="font-family: Verdana, sans-serif;"><span style="color: #222222;"><i>The reason an IPO audit takes longer than a typical private
company audit is the dramatic increase in the risk profile. I assure you
the audit partners want the audit to go quickly but they are, and rightfully
so, going to take extra precautions to ensure the work is performed to endure
the utmost scrutiny from the company, bankers, and ultimately the SEC. <span style="mso-spacerun: yes;"> </span>The size of your audit team and number of
questions will often triple during this process making for a robust and
challenging process. </i></span><span style="color: #222222;"><o:p></o:p></span></span></div>
<div style="background: white; margin-left: .75in;">
<span style="color: #222222; font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoListParagraph" style="line-height: normal; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="font-size: 12.0pt; mso-bidi-font-family: Cambria; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">5.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;">Is your company really strong enough to support the
valuation you expect?</b><span style="mso-spacerun: yes;"> </span>For this point, we will excuse readers at
health-science companies, but for those selling products and services, not
hopes and cures, size matters.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .25in;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoListParagraph" style="line-height: normal; margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="font-size: 12.0pt; mso-bidi-font-family: Cambria; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]-->IPOs are
expensive. <span style="mso-spacerun: yes;"> </span>Bankers, lawyers, accountants,
infrastructure and other service fees add up.<span style="mso-spacerun: yes;">
</span>While most costs tied directly to the process are “one time”, other
expenses including filings, higher legal and accounting bills and investor
relations costs will be an on-going reality. <span style="mso-spacerun: yes;"> </span>If the business isn’t able to comfortably absorb
those charges, it isn’t ready to be public.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .75in;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoListParagraph" style="line-height: normal; margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif;"><span style="font-size: 12.0pt; mso-bidi-font-family: Cambria; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">b.<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]-->Management teams
tend to be optimistic. Bankers, reflecting experience, tend to be conservative.<span style="mso-spacerun: yes;"> </span>Your finance team may produce a model
projecting revenues over the next two years of $X and $Y. By the time bankers have
helped you “refine” them, your forecasts (for the sell side analysts) will
likely be closer $.7X and $.8Y. Expect similar treatment (opposite direction)
for your expense projections.<span style="mso-spacerun: yes;"> </span>It is
those banker-adjusted numbers from which your initial valuation range will be
determined.<span style="mso-spacerun: yes;"> </span>Do the exercise in-house to
be sure the projected valuation, based off a hacked-up model, will be
acceptable <i style="mso-bidi-font-style: normal;">before</i> hiring banks and
kicking off a process.<span style="mso-spacerun: yes;"> </span>The more directly
you face the conservative forecast reality, the better prepared you will be for
the go/no go decision.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>Companies need not score a perfect 5 to launch, but
assessing answers to the hard questions upfront can profoundly improve the
timing and reduce the costs of the IPO process. </i><span style="mso-spacerun: yes;"> </span>Done right, an IPO can be a smooth, dare we
say fun, stepping-stone to success.<span style="mso-spacerun: yes;"> </span>A
solid public launch not only enhances the corporate treasury but also an
entity’s reputation, brand awareness, flexibility, competitive position and
quite possibly, the rate of growth.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The key, to paraphrase Kenny Rogers’ hit from yesteryear,
“The Gambler”, is this:<o:p></o:p></span></div>
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<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="font-family: Verdana, sans-serif;">“If your going to play
the game folks, you gotta learn to play it right.”</span><o:p></o:p></i></div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-2518665783931486212013-10-10T12:54:00.000-07:002013-11-14T20:41:08.259-08:00One the Dearth of Women Qualified to Serve on Public Technology Company Boards<span style="font-family: Trebuchet MS, sans-serif;">We were delighted to have this bit of commentary published on the allthingsd site today, and while it swerves from our other posts slightly, it does fit in with the "Things to think about for public or soon to be public companies...</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">http://allthingsd.com/20131009/actually-the-pool-is-quite-deep/</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<b><span style="font-family: Trebuchet MS, sans-serif; font-size: large;">Seeking Qualified Women for Board Seats - Like Trying to Find a Needle in..... well, like Trying to Find a Needle in a Sewing Kit....</span></b><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<div class="MsoNormal" style="margin-bottom: 15.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">"Dick
Costolo, Twitter’s chief executive, has prioritized finding a woman to be on
the board, but has found it difficult"<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 15.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">“The
issue isn’t the intention, the issue is just the paucity of candidates.”<o:p></o:p></span></i></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">"...the
pool for board-qualified women in technology is shallow..."<o:p></o:p></span></i></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><i style="mso-bidi-font-style: normal;"><span style="font-size: 15.0pt; mso-bidi-font-family: Georgia;">"There
is definitely a s supply-side problem." </span></i><span style="font-size: 15.0pt; mso-bidi-font-family: Georgia;">So asserts Twitter's
Chief Technology Officer, Adam Messinger when asked about women on boards...<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<i style="font-size: 15pt;"><span style="font-family: Trebuchet MS, sans-serif;">New York Times October 5, 2013</span></i><br />
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Wow.<span style="mso-spacerun: yes;">
</span>Where to begin?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Let's start with a fact: there are fewer women
then men who write and debug software code for a living. No denying that.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Now an observation: having been in many, many,
many board meetings over the years as a director, and other times as an advisor,
I have never, not even once, been in a meeting where at any time, even for 5
minutes, any board member of any gender was asked to give a company directive
in machine language, scratch out a decision policy in Ruby on Rails or for that
matter, code anything at all in any language.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Most of the meetings I have attended have called
on board members to ask questions, make introductions, discuss potential
acquisitions or acquisition inquiries and most importantly to debate and
discuss product strategies, marketing plans, management challenges,
compensation structures, financial progress, financing options, investment
decisions, how to deal with Wall Street and short and long term business goals.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">None of these topics requires a CS degree or years
in the CTOs office. Tech companies may well choose to have some engineering
prowess on the board, but companies with nothing but technical directors will
in all likelihood lose out to companies strategically advised by those with a
diverse set of opinions, perspectives and experiences.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">The problem isn't a "shallow pool" of qualified
candidates; it's a dearth of <i style="mso-bidi-font-style: normal;">high-profile</i>
individuals with the right skill set.<span style="mso-spacerun: yes;">
</span>The real question is how many companies are building boards to provide actual
advice versus how many are looking to put impressive, "A-list" names
on a list.<span style="mso-spacerun: yes;"> </span>Sure, it would help any
organization to have Marissa or Sheryl on the board, but as genuinely gifted as
those two leaders are, they are not the only females in the Valley with
demonstrable talent for thinking strategically, solving problems creatively,
analyzing financial performance, negotiating terms and perhaps most
importantly, assessing management skills.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">The blame for misguided myopia does not rest
solely with management teams of tech companies, or even with their existing
boards. The problem, or the "need a rock star" mindset is pervasive
in the executive recruiter industry too. Willingness to consider a proven
executive who doesn't already sit on a board is hard to find.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Speaking from personal experience, I was
fortunate enough to be a board member and committee chair for a NASDAQ listed company
some years back. During that time, I received multiple inquiries about my interest
in joining other boards but as the first one required a substantial time
commitment and as I had a day job, I declined.<span style="mso-spacerun: yes;"> </span>Eventually our company caught the attention of a few private
equity firms and then some strategic partners as well. After a period of active
negotiation and a resultant significant bump in the price, we were acquired in
what all considered a very successful exit.<span style="mso-spacerun: yes;"> </span>Post the dissolution of that board, my name fell off the
"active director" list and the board inquiry hotline went silent. <span style="mso-spacerun: yes;"> </span>I relate all this only as one first-hand
view of how the board selection process often works. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Women aren't on boards in Silicon Valley because
the half dozen who regularly get the call are busy and no one is asking the
rest.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Yet far from shallow, the actual pool of viable candidates is
deep with Comes, CFOS, those with capital market expertise, product managers,
general managers and a whole host of others who could bring talent, perspective
and useful know-how to any board. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">That said, not every company needs representation
from every demographic.<span style="mso-spacerun: yes;"> </span>Selecting
a board just to get the right mix of faces for the annual report photo is a
disservice to investors and management alike.<span style="mso-spacerun: yes;"> </span>When Facebook came under pressure for having an all male
board, it was truly a tempest in a teapot. Mark Zuckerberg had clearly
surrounded himself with a management team packed with powerful women charged
with actually running various aspects of the business on a day-to-day
basis.<span style="mso-spacerun: yes;"> </span>That inarguable fact
coupled with the company's dual-class stock structure that insures that the
board can offer opinions, suggestions and guidance, but has no real decision
making power, made the howling for a women representative on that board a
distracting sideshow.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">However, companies run and advised by a
heterogeneous band of brothers and those where the board vote really can swing policy
are quite different.<span style="mso-spacerun: yes;"> </span>In those
cases, it's not OK that the existing board looks the other way with a shrug
proclaiming that it's too hard to find talented candidates.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Trebuchet MS, sans-serif; font-size: 15.0pt; mso-bidi-font-family: Georgia;">Repeating: none of this is to say that every
single board needs representation from both genders or from every other
demographic profile. What is being said is that those companies that claim to
want to diversify, particularly those with products that are as often used by
one gender as the other, should try a little harder. The gentleman doth protest
too much, methinks.<o:p></o:p></span></div>
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<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
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<span style="font-size: 15.0pt; mso-bidi-font-family: Georgia;"><span style="font-family: Trebuchet MS, sans-serif;">A company that actually wanted too could fix the
problem in no time by hiring talent, not title.</span><span style="font-family: Georgia;"><o:p></o:p></span></span></div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-7715821848371393132013-08-15T07:27:00.000-07:002013-08-15T07:41:03.468-07:00Analysts and IPOs... Here We Go Again<div class="MsoNormal">
Analysts and IPOs - (We apologize for the length of this post)</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the background since the 2004 consent decree, analysts
and banker selections are again making news (New York Times Dealbook, Suzanne
Craig and Peter Lattman, August 11, 2013) and not in a good way.<span style="mso-spacerun: yes;"> </span>This renewed scrutiny is: </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
a) Not a bad turn of events at all - particularly given some
rumors of very bad (analyst pressuring) behavior on the part of those working
with the large private equity-backed IPOs.</div>
<div class="MsoNormal">
b) Not as clear cut as it may seem at first and </div>
<div class="MsoNormal">
c) Probably just another bonus unintended consequence of the
JOBS act, which encourages, or at very least now allows, conversations to
between issuers and analysts in the middle of the IPO preparation process,
while ignoring the constraints of the aforementioned consent decree.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Reasons why bankers
and analysts should not work together on potential IPO candidates</b>.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It all boils down to this; bankers are generally paid on
quantity, some combination of the number of deals done and the count of dollars
raised. <span style="mso-spacerun: yes;"> </span>With this sort of all
important (bonus determining) performance measure, pragmatic bankers have every
incentive to pursue as many reasonable transactions as possible. <span style="mso-spacerun: yes;"> </span>This is generally possible because when
they finish one deal, they are on to the next.<span style="mso-spacerun: yes;"> </span>There are only limited, on-going time commitments to the now-public
client, at least until it's time for a secondary or some M&A.<span style="mso-spacerun: yes;"> </span>Please note, we are not implying that
bankers don't care about the quality of the companies they take public; they do
care as each success can be leveraged into new mandates. Nonetheless, assuming
a reasonable quality screen, quantity matters most of all.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Analysts on the other hand, generally earn their bonuses
based on the quality of their work.<span style="mso-spacerun: yes;">
</span>A strong - or weak placement in the various buyside investor polls like
the detailed Greenwich Associates poll or the more far-reaching but less precise
Institutional Investor poll can have an enormous impact on the annual take-home
pay of an analyst. That reality has two implications. <span style="mso-spacerun: yes;"> </span>First, on an ongoing basis, analysts
need to keep investors accurately informed about the goings on in the industry
and at each particular company.<span style="mso-spacerun: yes;">
</span>That service requires a very definite time commitment.<span style="mso-spacerun: yes;"> </span>Additionally, analysts need to be
selective about which companies they cover, as their obligations are on-going
and cumulative.<span style="mso-spacerun: yes;"> </span>Writing detailed
research on stocks about which investors care little will not garner enough
bonus generating votes to be worth the effort.<span style="mso-spacerun: yes;"> </span>Said succinctly, bankers would like analysts to cover more
and more and more companies.<span style="mso-spacerun: yes;">
</span>Analysts, should they aspire to keep their audience of investors/voters,
have to be credible and need to enforce a quality screen and can not over
commit. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Here is where the plot thickens: <b style="mso-bidi-font-weight: normal;">bankers directly generate revenue for their firms while analysts, most
directly are a cost center, generating revenue for the home team only
indirectly via the trading desk or <i style="mso-bidi-font-style: normal;">banking
wins</i>....</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Why shouldn't analyst be involved in the banking process? <span style="mso-spacerun: yes;"> </span>Because bankers have every incentive to
pressure analysts into agreeing to cover a company, whether or not the analyst
is genuinely enthusiastic about the prospect.<span style="mso-spacerun: yes;"> </span>Analysts, well aware that as a cost center, every
"NO" has negative short term P&L implications for their employer,
clearly feel that pressure.<span style="mso-spacerun: yes;"> </span>In a
business beset by routine layoffs, no one wants to be the Little Engine that
Couldn't.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The solution?<span style="mso-spacerun: yes;">
</span>Keep analysts out of the banker selection process to eliminate this sort
of pressure.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">HOWEVER - IT'S NOT THAT SIMPLE<o:p></o:p></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">Reasons why analysts
and bankers need to work together on potential IPO candidates</b>.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It all boils down to this: If an analyst is not impressed by
a company or a segment of a larger industry, if the analyst is not inclined to
stay involved with a newly public company, then that analyst's bank should not
attempt to sell that IPO to its investing clients.<span style="mso-spacerun: yes;"> </span>Period.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Therein the problem: if the analyst doesn't meet with the
prospect before the banker selection process, how is he or she to evaluate the potential
issuer's opportunity and decide whether or not the new company is worthy of
ongoing coverage?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Furthermore, if a potential issuer has not met with an
analyst, it can not be comfortable that the analyst understands the company's story
and potential. These meetings are not about eliciting a "Yes, I will recommend
this stock"! statement.<span style="mso-spacerun: yes;"> </span>They
are exploratory two-way evaluations that can be very valuable to analysts both
because they learn about new products, services and companies, and because they
gain a better understanding of what competition is coming round the bend for
the existing public incumbents.<span style="mso-spacerun: yes;"> </span>Analysts
who met with a private Workday long before it's bakeoff were able to raise
yellow flags for investors in Oracle or ADP to pay attention to this new
competitor.<span style="mso-spacerun: yes;"> </span>That is exactly why analysts
are helpful to investors; they exist to gather and distribute a deeper level of
insight.<span style="mso-spacerun: yes;"> </span>Denying analysts the
chance to meet with private companies would hurt all investors.<span style="mso-spacerun: yes;"> </span>Yet there can be no doubt that those
early meetings are about gaining both insight in the industry<i style="mso-bidi-font-style: normal;"> and</i> favor for their banks: favor that should
hopefully place them on the banker selection short-list when it comes time for
the lucrative public offering.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
But wait, there's more. These private company, pre-IPO
meetings matter not only to bankers and analysts but also are critical for
investors. When it comes time to make the "invest" or
"pass" decision on IPOs, one of elements buyside investors consider
is how well they will be able to track the changing fortunes of the new issue.<span style="mso-spacerun: yes;"> </span>Analyst coverage is a very important
element of that information flow.<span style="mso-spacerun: yes;">
</span>If the buyside can not be sure that someone they respect will be
covering the stock - covering does not mean perpetually recommending - then the
risk they take in buying a new issue increases dramatically.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There are clear conflicts of interest between parts of
investment banks when it comes to IPOs and yet, should analysts be completely
excluded from the IPO process, bankers, analysts, issuers <i style="mso-bidi-font-style: normal;">and</i> investors would all be meaningfully less informed. No one but
litigators would benefit from that arrangement.</div>
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Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-36939928231276367732013-07-11T11:19:00.001-07:002013-07-19T11:07:46.747-07:00Part II - The back five of our Common but Easily Avoidable Mistakes list<div class="MsoNormal">
Oh ye of little faith.<span style="mso-spacerun: yes;">
</span>Here you were thinking we were only offering up Part 1, when in fact we
just figured we should give everyone time off for the Fourth.<span style="mso-spacerun: yes;"> </span>On with part two:<span style="mso-spacerun: yes;"> </span>Items 6 through 10 of mistakes newly
public companies should really - no REALLY. <span style="mso-spacerun: yes;"> </span>try to avoid. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-spacerun: yes;"> </span><b style="mso-bidi-font-weight: normal;">If at all possible, do not:<o:p></o:p></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
6. <b style="mso-bidi-font-weight: normal;">Change your story: </b><span style="mso-spacerun: yes;"> </span>If you go public as a SaaS provider with
predictable earnings, do not even think of repositioning to be a mobile, big
data play because those multiples are higher, or for any other reason.<span style="mso-spacerun: yes;"> </span>Investors will be rightly alarmed if during
the first couple of quarters as a public company, a recent IPO:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]-->Changes
the model or strategy communicated during the roadshow <o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]-->Changes
management or <o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Courier New"; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]-->Makes
a major acquisition (with exceptions)<o:p></o:p></div>
<div class="MsoNormal" style="margin-left: .5in;">
<br /></div>
<div class="MsoNormal">
Early changes to the business model or strategy communicated
during the IPO scare investors. They took of leap of faith and invested
with your risky offering of a new issue because they literally bought into the
story you told on the road.<span style="mso-spacerun: yes;"> </span>Not
surprisingly, they expect you to stick with that plan now that their money
lines your company's bank account.<span style="mso-spacerun: yes;">
</span><o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Investors also expect companies to have the right executives
in the right seats before the IPO.<span style="mso-spacerun: yes;">
</span>Swap a key player out too quickly and your new shareholders will cover the
field with yellow, if not red, flags, reasoning that early changes signal big
problems. <span style="mso-spacerun: yes;"> </span>The same often,
although not always, applies to material acquisitions in the early going unless
a) you were clear in the S-1 that acquisitions were a likely use of funds or b)
you can make a very strong case for why the move is brilliantly opportunistic.<span style="mso-spacerun: yes;"> </span>Don't let your new investors think that
their money is burning a hole in your pocket, or that you are taking your eye
of the main business.<span style="mso-spacerun: yes;"> </span>Know that even
though they bought at the IPO, they are not really invested until they see several
quarters of consistent, "as billed" performance. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the words of one top institutional shareholder with whom
we recently spoke, <span style="mso-spacerun: yes;"> </span>“the first 6
months are the honeymoon.<span style="mso-spacerun: yes;"> </span>Management
should be solely focused on running the business and delivering. Small R&D
acquisitions are okay but nothing big". <span style="mso-spacerun: yes;"> </span>Deliver what you promised early and the credibility earned
will carry you a long way down the road.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
7. <b style="mso-bidi-font-weight: normal;">Overwhelm or underwhelm with metrics</b>.<span style="mso-spacerun: yes;"> </span>Investors need to be able to track a
young public company's progress and <b style="mso-bidi-font-weight: normal;">really</b>
understand the mechanics of the model.<span style="mso-spacerun: yes;">
</span>That means they need to follow at least some of the key indicators that
you watch; those that don't appear on any formal financial statement.<span style="mso-spacerun: yes;"> </span>Too little info equals too much
risk.<span style="mso-spacerun: yes;"> </span>However, here's where it
gets tricky.<span style="mso-spacerun: yes;"> </span>It's also possible to
share too much.<span style="mso-spacerun: yes;"> </span>Companies that
release pages of data points end up wasting investors' time, as the chaff/wheat
balance is out of whack.<span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Smart companies put significant effort into determining the
right balance for sharing information that will be genuinely helpful to
investors but not terribly useful for competitors.<span style="mso-spacerun: yes;"> </span>Investors will always clamor for more - or at least the same
info that the competition shares, but companies should define their own playing
field rather than letting competitors do so. The key is to explain why you give
the metrics you do AND to be equally clear about why sharing others will not be
helpful. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Why? Here's a recent example.<span style="mso-spacerun: yes;"> </span>In our conversations, investors singled out PANW as a company
hurt by its lack of clarity.<span style="mso-spacerun: yes;"> </span>When
the company missed street expectations last quarter, investors lacking the
right metrics, could not determine the root cause of the problem.<span style="mso-spacerun: yes;"> </span>Long-term investors expressed
frustration with the company's lack of transparency and that made a bad
situation worse.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Portfolio managers generally believe that a company providing
fewer metrics than its peer group is less investor friendly, believing that reduced
disclosure creates uncertainty and volatility. <span style="mso-spacerun: yes;"> </span>They may be right or wrong on this as, when you think about
it, missing more target numbers may not actually be better than missing fewer,
but hey; it's what they believe. <span style="mso-spacerun: yes;"> </span>So, be ready. <span style="mso-spacerun: yes;"> </span>Study
what peers disclose and if necessary, be ready to explain why you have chosen a
more relevant path. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
8. <b style="mso-bidi-font-weight: normal;">Talk about your valuation:</b><span style="mso-spacerun: yes;"> </span>This one is simple. Management should,
in the words of Taylor Swift, never, ever, ever talk about valuation.<span style="mso-spacerun: yes;"> </span>Talk about the company's prospects,
talk about products, technology and the go to market strategy, talk about great
new hires and customer wins, but do not talk about the valuation of your stock.
That's sort of like lecturing Coach K on game strategy.<span style="mso-spacerun: yes;"> </span>The audience knows exponentially more
about this topic then management ever will.<span style="mso-spacerun: yes;"> </span>Management should talk about the business and let investors decide
if a stock is a good investment <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
9. <b style="mso-bidi-font-weight: normal;">Fail to provide focused and informed IR</b>: IR really matters.
No let us restate that: <span style="mso-spacerun: yes;"> </span>if you
have good, reliable, informed IR, it can really matter. <span style="mso-spacerun: yes;"> </span>Don't take the easy route or under
invest in the function internally. Investors tell us that short-term thinking will
come back to bite you if [when] the going gets tough as they will seek
reassurances from spokespeople they know and trust to be in the loop. <span style="mso-spacerun: yes;"> </span>Better plan: get to know your top
investors and develop a strong, direct dialogue.<span style="mso-spacerun: yes;"> </span>You will learn as much from them as they do from you. <span style="mso-spacerun: yes;"> </span>There is no substitute for having a
strong, always-in-the-know, dedicated IRO - just ask your investors.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
10. <b style="mso-bidi-font-weight: normal;">Be
ubiquitous:</b><span style="mso-spacerun: yes;"> </span>Most young
companies are invited to speak at one or more conferences sponsored by each and
every bank on the cover of the IPO prospectus. They are also invited to speak
at an endless list of other investor events and constantly encouraged to do
non-deal roadshows.<span style="mso-spacerun: yes;"> </span>In the early
quarters, if the story hasn't changed much from the original pitch, just say "No".
<span style="mso-spacerun: yes;"> </span>Investors want you focused on
delivering results, not speeches. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Even after the first few quarters, trust
that generally, less is more. After a few presentations, the returns not only
diminish, they approach the horizontal axis. <span style="mso-spacerun: yes;"> </span>Attend a couple of key investor events each year to keep your
investors informed and as a thank you to analysts for continued coverage.<span style="mso-spacerun: yes;"> </span>Supplement that with a couple of
non-deal roadshows.<span style="mso-spacerun: yes;"> </span>Other
than that, meet with investors when you have something new and interesting to
say.<span style="mso-spacerun: yes;"> </span>They will appreciate that you
are using both your and their time well.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We pulled this list together based on many conversations
with top investors and seasoned with our own experience.<span style="mso-spacerun: yes;"> </span>We've watched many companies learn the
hard way. Here's hoping this short cut is helpful. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
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<div class="MsoNormal">
<i>Oh, and one more thing. <span style="mso-spacerun: yes;"> </span>In addition to interviewing the buyside regularly, we run a business.<span style="mso-spacerun: yes;"> </span>Therefore this
is the part where we remind you that if the unexpected happens, you unavoidably
stumble or did not read Parts I and II in time -- feel free to call us for help
with Part III “How to get a good company back on track in the public markets.</i><o:p></o:p></div>
Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-87223163071817433432013-06-17T09:02:00.000-07:002013-07-19T11:08:50.210-07:00<div class="MsoNormal">
They're baaack. With the strong stock market performance of
the first six months of 2013 (+15%) and with the swing to positive inflows to
active equity funds, rather than out, investors have clearly signaled that once
again, their interest lies on the denominator side of the risk/reward equation.<span style="mso-spacerun: yes;"> </span>Not only are equity investments
appealing, but also, even those with higher risk profiles including IPOs are again
catching investor's fancy.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
On many fronts, that's good news.<span style="mso-spacerun: yes;"> </span>Many are cheering the uptick in IPOs, particularly dramatic
in the med/tech space, but don’t be fooled, a robust IPO market conjures up
both good and bad memories for investors.<span style="mso-spacerun: yes;">
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Never forget that it's one thing to "get a company
public", but for those who choose that route, the misnamed IPO
"exit" is really just an important milestone on the way to building a
sustainable business with the opportunity to thrive in the years ahead.<span style="mso-spacerun: yes;"> </span>Unfortunately, as we know too well, the
majority of IPOs, even some of the most highly anticipated, race out of the
gate only to stumble during the first 18 months on the public company track,
often failing to regain their footing fast enough to ever realize a fraction of
their potential.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With that in mind, and based on years of working closely
with institutional investors, in two parts, we offer our guide for newly public
management teams to the top 10 things fledgling public issuers should not do.
Ever. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;">10 Ways to go from
super steed to dog chow in record time<o:p></o:p></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
1. <b style="mso-bidi-font-weight: normal;">MISS YOUR NUMBERS:</b><span style="mso-spacerun: yes;"> </span>Miss the numbers in one of the first 2
quarters after IPO and investors will quickly assume that management is
incompetent.<span style="mso-spacerun: yes;"> </span>Institutions know
that bankers urge conservatism on the early quarterly forecasts.<span style="mso-spacerun: yes;"> </span>In fact, the rule is "set
expectations that you can not miss". Therefore, if you miss that inch-high
hurdle, you either didn't listen or don't have a grip on your business, and it's
a very long road to recovery and credibility. <span style="mso-spacerun: yes;"> </span>Make sure the model you bless with the street is conservative.
They are perfectly happy to have you "beat and raise". <span style="mso-spacerun: yes;"> </span>If you miss Q1 or Q2 nothing else much
matters from an investor's perspective.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
2. <b style="mso-bidi-font-weight: normal;">Be naive about the ways of Wall Street</b>;<span style="mso-spacerun: yes;"> </span>If you beat the analyst’s model but
miss their real expectations, and worse, fail to understand that you missed you
will again have credibility issues. <span style="mso-spacerun: yes;"> </span>Marin Software is one (of many) poster children for this problem.
<span style="mso-spacerun: yes;"> </span>The company went public with what
appeared to be extremely conservative research analyst forecasts. <span style="mso-spacerun: yes;"> </span>Unfortunately, its first quarter results
narrowly beat those forecasts and worse, showed growth decelerating more
rapidly than the street expected. Oops. Management then compounded the error by
meeting with top investors, failing to acknowledge the problem, saying they could
not understand the selloff as after all, “We beat the analyst’s models!” Double
oops.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Make no mistake, investors will pummel your stock for any
miss, but if management owns up to a rookie mistake, the trip back to
credibility will likely be much faster.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
How to avoid this pothole? Management should clearly
communicate the core metrics by which analysts should measure the business
performance and from the start, should maintain a dialog with both the buy and
sell side to really understand (not to comment on or change, just to
understand) street expectations. <span style="mso-spacerun: yes;"> </span>In the event of an unexpected deviation from plan, be ready
to fully explain the delta and how you hope to avoid a similar surprise in the
future.<span style="mso-spacerun: yes;"> </span>Most buyside investors
will tell you "there's no such thing as a one quarter problem".<span style="mso-spacerun: yes;"> </span>The more rapidly management owns up to
the realistic magnitude of the hiccup, the quicker investors will rebuild
trust.<span style="mso-spacerun: yes;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
3. <b style="mso-bidi-font-weight: normal;">Bash your direct competitors</b>:<span style="mso-spacerun: yes;"> </span>In big growth markets there should be
plenty of room for multiple players. Bashing competitors sends a message that
the market may not be as big or fast growing as investors hoped. <span style="mso-spacerun: yes;"> </span>Furthermore, a lower competitor
valuation is bound to hit your stock as well, so wish them the best. <span style="mso-spacerun: yes;"> </span>Explain to investors factually how you
are different, preferably in terms of product performance, architecture, and
technology. <span style="mso-spacerun: yes;"> </span>Explain why you win
when you compete, but do not make your success contingent on beating the other
guy.<span style="mso-spacerun: yes;"> </span>And one more thing,
suing your competitor while they are on their roadshow, particularly about some
issue that has been in the markets for months, makes your team look scared,
wasteful and just a little pathetic.<span style="mso-spacerun: yes;">
</span>It also generally makes the buy side laugh as they have seen that movie
before.<span style="mso-spacerun: yes;"> </span>Tread lightly on your
competitors.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
4. <b style="mso-bidi-font-weight: normal;">Casually dismiss the behemoths:</b><span style="mso-spacerun: yes;"> </span>Pooh-poohing the ability of those big,
well-funded technology companies to respond nimbly and competitively, is never
a good story. <span style="mso-spacerun: yes;"> </span>At least from our
observations, it also generally isn't a good business practice, but that's a
different column.<span style="mso-spacerun: yes;"> </span>Investors
like management teams that are wary, respectful and paranoid. <span style="mso-spacerun: yes;"> </span>Acknowledge investors' fears that
competitors are big and well-funded and cannot be ignored. <span style="mso-spacerun: yes;"> </span>Then tell the buyside what you are doing
to maintain your lead, how you have built your financial model to leave room to
respond if need be and how paranoia drives you.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
5. <b style="mso-bidi-font-weight: normal;">Sell too fast:</b><span style="mso-spacerun: yes;"> </span>Sorry folks, active management should
not sell stock before reporting two clean quarters.<span style="mso-spacerun: yes;"> </span>While this is always true, it is even more distressing to
the buyside when individuals who sold in or just before the IPO, hit the
cashout button again at first opportunity. <span style="mso-spacerun: yes;"> </span>Investors identify management selling in an early lock-up release
as a major red flag that can trigger institutional selling or give investors
pause about building a bigger position or making a long term commitment. <span style="mso-spacerun: yes;"> </span>Public investors prefer management 10b-5
plans as a means of monetization. <span style="mso-spacerun: yes;"> </span>That
said, sometimes individual management members have been patient or are concerns
about diversification.<span style="mso-spacerun: yes;"> </span>If an
individual hasn't sold recently he or she can sell early (again much better if
after two strong and clean quarters) without freaking out investors. The key is
to sell 10% or less of vested holdings in the early going.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There you have it; part 1 of our thoughts on errors a newly
public company should never make, based on conversations with the buyside.<span style="mso-spacerun: yes;"> </span>But wait, there's more... part 2 coming
soon.</div>
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Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-60816606866512691492013-05-13T10:36:00.000-07:002013-07-19T11:09:58.976-07:00Straight from the Buy Side - Part 1<!--[if gte mso 9]><xml>
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Sometimes, its good to go straight to the source.....</div>
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<br /></div>
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With the addition of Leslie Pfrang the enormously talented Leslie Pfrang to open the NY office and head up Class V East, over the past few months, we
have been meeting with investors and private company management teams both to discuss our
expanded products and services and to listen to their thoughts and concerns about the IPO market in 2013.<br />
<br />
What we learned should keep this blog going for - well, at the rate of recent posts - decades. Hopefully, we will shrink that down to months. <br />
<br />
In future posts, we'll share investors' quotes about bookrunner structures, share allocations, preferred lock-up release strategies and how to recover if something runs amuck during the first year as a public company. For the first "reveal"of what investors are thinking, we're focused on what, if anything, from the syndicate side has any impact on the decisions by those actually making the buy or pass decision on IPOs. <i style="font-weight: bold;"> </i><br />
<i style="font-weight: bold;"><br /></i>
<i style="font-weight: bold;">Perhaps because it was the question that received the most consistent answer from the country's largest IPO buyers, we're starting with these investors' almost universal belief that in IPOs, the smaller, full-service or boutique banks are under-compensated relative to value provided. </i> The comments that follow may be our writing, but they are wholly reflective, and in several cases verbatim quotes, from the country's biggest long-only buyers of IPOs. We addressed our questions specifically to those firms and portfolio mangers that investment bankers call out when building "ideal ownership" target lists for new issues.</div>
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<br /></div>
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By way of background for those who haven't been through the
process, when picking bankers "for the cover" of an IPO, the goal is
to build a syndicate of banking teams with different skill sets, serving different investor market segments, hoping that when the time comes for the roadshow, issuers can maximize the
number and variety of accounts that will hear the story. That's the theory. In reality what
happens, particularly as the market has come back from the adventure that was the 2008/2009 debacle, is that issuers will choose as bookrunners several big banks that look very much alike in terms of skills and client
focus. Once those two or more big guys have been promised the majority of the total deal fees, the issuer-to-be will parse out what remains to the smaller banking organizations. </div>
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<br /></div>
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Issuers are acting pragmatically when they choose this
structure. With compressed bonus
structures, there is a great deal of movement by bankers and analysts between
firms and therefore, many issuers wisely want to have a big cheese and an
"insurance big cheese" firm to work actively on the deal, just in case a
banker or the key analyst opts out in the middle of the process. Furthermore, as no one firm has anything close to a monopoly on good ideas, having more smart minds fully engaged in the process improves the output. The problem is
that by the time two or more big banks have been enticed into the deal, the
funds left to compensate the rest of the syndicate are sparse.</div>
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<br /></div>
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During the actual IPO process, at least for "hot"
companies, this isn't much of a problem. The simple truth is that for the
sought-after companies, those offering a compelling investment thesis, a solid
financial plan as well as a credible and skilled management team, most any bank with a balance sheet can
place an IPO. For those that are
more complicated or speculative, or for those where something goes wrong after trading begins, the importance of a fully committed syndicate, including several high-quality, engaged co-managers, grows rapidly as investors are likely to seek a cross-section of opinions.</div>
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<br /></div>
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However, once the IPO is in the rearview mirror, the image
blurs. Analysts at the large
"bulge bracket" banks, are compelled to spend the bulk of their time
and effort following the largest market cap companies. Why? Because coverage of large cap stocks drives a research analyst's Institutional Investor (or II) ranking. Bankers feature these rankings when pitching new IPO business, to demonstrate the superiority of their research team. Perhaps even more importantly from an analyst's perspective, research directors use this ranking to determine compensation and allocate the bonus pool. Perversely, according the investors with whom we spoke, high-ranking in II correlates negatively with strength in on-going coverage of smaller market cap, recent IPOs. This
means that if you, the newly issued IPO, have a market cap much below $2.0
billion or a float much below $.75 - $1.0 billion, you just aren't all that
important to those analysts. You
are the talented singer at the Bluebird Cafe and their careers are made
supporting the acts at the Grand Olde Opry. </div>
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<br /></div>
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However, the smaller firms earn their stripes by discovering
and/or promoting those names everyone doesn't already know. As talented as some of the analysts at these firms are, they are unlikely to have an edge on Google or Apple. However, they do
have the flexibility to spend more time on the "up and comers". It is for that work that the buyside will pay them. Long after the IPO fireworks have faded, these are the
analysts that are more likely to stay with your company, promoting your story
when appropriate - if for no other reason than that they have to do so to differentiate and stay
relevant.</div>
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<br /></div>
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But don't take our word for it. Here is the specific question we asked the major IPO buyers, followed by the
verbatim answers from the investors (in no particular order).<br />
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Q. <b>On a scale of 1 to
10 how important are some of the smaller (non bulge bracket) investment banks to the health of the technology IPO
and on-going research process</b>.</div>
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<br /></div>
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<b>Investor 1</b>. <i>Boutiques add all the value for companies < $ 3 bln. They do all the real research and can give a more balanced view.
I think economics should be paid 60 bulge/40 boutiques on the IPO, maybe more
to boutiques on the follow on. Bookrunners on the top line get the quality deals
because of who they are. The four guys on the bottom line are what make the
stock work over time</i>.</div>
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<br /></div>
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or</div>
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<br /></div>
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<b>Investor 2:</b> <i>Co-managers do all the ongoing research,
they are not all busy with II like the bulge bracket. II focus for bulge bracket firms means they have to spend most of their time on large cap names, pushing the small cap stocks off to their juniors. Bulge will do non-deal roadshow and call management. Boutiques
will do real proprietary research and have a differentiated view. We think 25 to 35% should go to the boutiques on IPO and
more on follow on.<o:p></o:p></i><br />
<i><br /></i>
or</div>
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<br /></div>
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<b>Investor 3</b>. <i>Boutiques
are very important to my decision to invest. Economics for boutiques should be
much higher than currently, perhaps 30 to 35%.</i></div>
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<br /></div>
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These are NOT culled responses from a group of diverse
answers, and in case anyone is suspect, note the names on the cover have no impact on the work Class V does. The truth is that 90% of the companies in our survey answered the questions similarly to those quoted above. Institutional investors definitely value the big
banks but also clearly rely on the aftermarket research
provided by the relatively smaller firms. Quite
to the contrary of those bemoaning the demise of the famous Four Horsemen (Alex
Brown, H&Q, Montgomery Securities and Robertson Stephens), an entire
stampede of somewhat smaller full service, regional and boutique firms are very much alive. <i>However, it is up to management teams and the boards of companies headed down the IPO track, those thinking beyond the bell-ringing ceremony and on to the quarters and years that follow, to make sure those non-bulge bracket organizations are able to fund the costs of on-going proprietary research. The health of the IPO market depends on it.</i><br />
<br />
Next up: - the buyside's thoughts on the age old - <i>How many bookrunners?</i> question.<br />
<br />
<br />
<br />
<br /></div>
<!--EndFragment-->Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.comtag:blogger.com,1999:blog-8452624782709595774.post-14738166654198965702012-01-24T09:20:00.000-08:002012-01-24T09:20:53.450-08:00Done right, emergent private exchanges can strengthen the IPO marketplace. "Done right" is the key<!--[if gte mso 9]><xml>
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<br />
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Read another interesting article, describing a recent talk,
that brings up some issues worth a second look. The speaker and subject of the
posting is a very smart entrepreneur who knows a great deal about markets, both
public and private. The piece
covers private share trading, growth businesses for the last couple of years,
as investors have scrambled for early access to shares of high-profile
companies like Groupon, Zynga and Facebook among others.</div>
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<br /></div>
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From the combination of early employees seeking pre-IPO
liquidity and later stage investors wanting to own shares of a few particular
companies at pre-IPO prices, emerged an opportunity for a couple of savvy
entities that built sophisticated eBay like mechanisms for trading private stock. The strong IPO pricing and aftermarket
performance LinkedIn were all it took to convince plenty of qualified investors
to line up for a chance to participate in the private company markets;
investors ranging from well to do individuals to some of the country's largest mutual
and hedge funds.</div>
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<br /></div>
<div class="MsoNormal">
The good news is that the success of these emergent trading platforms
demonstrates that investors are clearly willing to try new markets, even ones
that come with the disadvantage of much less transparency. Investors in public stocks at least
have quarterly financial releases to help them determine if the investment
thesis is on track. They also have
a liquid market in which to sell their stock if they perceive that things
aren't going as hoped. Conversely,
investors in private securities generally have significantly less information
and the rather important disadvantage, at least for now, of tremendously
reduced liquidity versus public markets.
If something goes wrong, selling a block of private stock can be on par
with selling a house in central Florida in 2009, except that with real estate, (assuming
one covered the mortgage payments) the seller with an unwanted property still
has the house. With private equity, if the investment company hits a serious
speed bump, the seller can be left with a worthless piece of paper. Period.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Recently, seeking the potential extra reward, investors have
shown a willingness to absorb that incremental risk. Or at least they did last year. 2012 could be a different story. Plenty of private investors did well in early 2011. Their success
stories proved to be a siren call, attracting new private investors in search
of similar success. But as with
all markets, the private market news was all good until it wasn't. "Wasn't" became tangible with
Groupon and Zynga. These well-known companies with hotly anticipated public
offerings, sold shares in the private market at prices higher than their subsequent IPO value. In the aftermarket, at least as of
January 2012, these companies continue to trade below some of their former
private market prices. The late-stage, private market bets on these "high
fliers" failed to pay off. Too
many more of these and the private markets will likely have a very difficult
time attracting new investors. While
both Zynga and Groupon may pay off splendidly in the coming years, there was no
reward for those who jumped in on the late side of early.</div>
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<br /></div>
<div class="MsoNormal">
Astonishingly, the recently posted article about these
markets suggests that when companies trade at higher prices in the
information-limited private markets and then perform poorly in the transparent,
public market, it is an indication, at least according to our high-profile
speaker, that "the IPO market is dying". Really? That a
large pool of investors pays less for a company when they have data to analyze when compared to what a small contingent paid when they were trading on blind
faith and betting on a greater fool theory, indicates that the educated market
doesn't work? In what alternative
universe? </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There is definitely a place in the world for emerging
private market trading mechanisms done right, and they can be a very useful
mezzanine step while companies mature toward prime time readiness. However, it is nonsensical to suggest
that the existence of a new private market has dire consequences for the public
marketplace. The IPO market is alive, well, healthy and thankfully much more
selective than it was during the drunken era 12-15 years ago. While that's rough on the
relative performance of today's private investors, such rationality bodes well
for all investors, public and private over the long run. Darwin's commentary on survival applies
far beyond the animal kingdom. </div>
<!--EndFragment-->Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com0tag:blogger.com,1999:blog-8452624782709595774.post-3980002088051721242012-01-08T17:35:00.001-08:002012-01-08T20:03:14.139-08:00Off and Running<div class="MsoNormal">
<span style="font-family: Georgia, 'Times New Roman', serif;">Now that blogs are rather out of fashion, I feel compelled to launch one. In part this is because sorting through my in box at year end, I found so much mis-information on a topic near and dear to my heart, that I won't sleep well without throwing some experienced-based observations into the conversation. </span><span style="font-family: Georgia, 'Times New Roman', serif;">For instance, I recently saw a blog post about picking bankers for an IPO, that made several assertions with which I beg to differ.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span></div>
<div style="background: white; margin-bottom: .1pt; margin-top: .1pt; mso-margin-bottom-alt: auto; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-margin-top-alt: auto; mso-para-margin-bottom: .01gd; mso-para-margin-top: .01gd;">
<span style="font-family: Georgia, 'Times New Roman', serif;"><strong><span style="font-weight: normal;">This blog argued that</span></strong><span class="apple-converted-space"> </span>by the time a pre-IPO company is ready to actually hire investment bankers, it's too late to meet new candidates; according to this blog, the competitors should have been fully vetted already. This is really bad advice. It may have been true 30 years ago when banking was "a relationship business" but it is a poor strategy today. Here's why: One of the best ways to realize a salary or title gain on Wall Street is to move firms. In fact every year after bonuses are paid, there is a street wide game of musical chairs. While some firms (Morgan Stanley among others) have seen less turnover than others in recent years, to settle on a bank before it really is time to begin the process is to pack for a vacation by looking at last month's weather forecast. I have yet to attend a bakeoff, even those that were conducted as mere formalities to sanctify pre-existing decisions, where some bank didn't surprise on the upside while another meaningfully underperformed expectations. <o:p></o:p></span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span></div>
<div style="background: white; margin-bottom: .1pt; margin-top: .1pt; mso-margin-bottom-alt: auto; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-margin-top-alt: auto; mso-para-margin-bottom: .01gd; mso-para-margin-top: .01gd;">
<span style="font-family: Georgia, 'Times New Roman', serif;">Secondly, bankers that have the most time to visit early and often in the period before a deal are sometimes bankers who may have excess time on their hands - never a good sign. Certainly, it helps to have met with banks at least once before a transaction is in sight, just to understand the differences in style, but to have come to any sort of conclusion ahead of the game is almost always a mistake.<o:p></o:p></span></div>
<div style="background: white; margin-bottom: .1pt; margin-top: .1pt; mso-margin-bottom-alt: auto; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-margin-top-alt: auto; mso-para-margin-bottom: .01gd; mso-para-margin-top: .01gd;">
<span style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span></div>
<div style="background: white; margin-bottom: .1pt; margin-top: .1pt; mso-margin-bottom-alt: auto; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-margin-top-alt: auto; mso-para-margin-bottom: .01gd; mso-para-margin-top: .01gd;">
<span style="font-family: Georgia, 'Times New Roman', serif;">If they wanted to, the CEO and CFO of a hot IPO prospect could spend endless time meeting with bankers happy to drop in, but what a massive time sink. Meet the contenders once if you like but spend the bulk of your time building the business. Allocate the time to banks and bankers when there is a decision at hand. That way, you'll know you are evaluating the actual team that will be there in the trenches with you.<o:p></o:p></span></div>
<div style="background: white; margin-bottom: .1pt; margin-top: .1pt; mso-margin-bottom-alt: auto; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-margin-top-alt: auto; mso-para-margin-bottom: .01gd; mso-para-margin-top: .01gd;">
<span style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span></div>
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<span style="font-family: Georgia, 'Times New Roman', serif;">A second suggestion this blog made for those picking a team "is be sure to understand the reach of the banks under consideration" and then, it listed a favorite. Well, yes, reach is important, but understand that ALL of the major bulge bracket firms talk everyday to the very same clients. Some of the smaller boutique firms focus their efforts more specifically, by region or by fund description, but there isn't a successful fund manager anywhere who doesn't keep a dialog going with the whole lot of investment banks out there as after all, when investing, more information is always better.<o:p></o:p></span></div>
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<span style="font-family: Georgia, 'Times New Roman', serif;">A third point made in this piece was "pick the banker who had a hot hand last year". That is as clever as the old "pick the investment manager who had the hot hand last year". For those who haven't followed the industry, rarely is there a fund that repeats at the top of it's sector. On those rare occasions when a fund did put two back to back winners together, year 3 was generally a clunker. Success rarely translates from year to year. Serious investors evaluate the issue coming to market, not the logo of the bank on the cover, beyond the "tier one", "tier two", and "tier who?” designation. It's the quality of the work, not the color of the logo that matter. The key is not figuring out who had the hot hand last year, it's figuring out who will field the very best team for you this year, on an individual-by-individual basis.<o:p></o:p></span></div>
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<span style="font-family: Georgia, 'Times New Roman', serif;">I've passed my self-imposed 600 word limit, so enough. The point is, beware of generalizations, as there is nothing static about investors or investment banks. Nothing beats solid homework on the various banking teams at the time you are ready to hire them to work for you.</span></div>Class V Grouphttp://www.blogger.com/profile/13421448070814083948noreply@blogger.com