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Importance of PR and IR in IPO communications

, November 14, 2018, 0 Comments

ipo-pr-ir-the-stock-market-wealth-marketexpress-inThe success of an initial public offering ( IPO ) depends on a number of factors or elements. It is common knowledge, at least among market intermediaries, that the best time to hit the market for a company planning to go public is when the market is booming and investor confidence is at a high level.

A class of investors have a penchant for IPOs because shares are generally available at reasonable prices. This is particularly true for small and medium companies which have ambitions to grow big and need capital to finance their greenfield/brownfield ventures.

On the flip side, it is also true that a company whose finances are in a shambles or is involved in too many litigation’s is likely to face stiff investor resistance in the primary market. For such companies, it is not enough to give proper disclosures. Investors want information on how the business of the company is likely to be impacted by adverse court orders in the short and medium term.

Perceptions, particularly negative reports, need to be managed/addressed appropriately through focused messaging. This involves timely sharing of material information with the media in response to their queries. Other key influencers of public opinion are also addressed separately through investor/analyst meets. This becomes critical to pre-empt misleading reports which could damage the reputation of a company going public. It takes years for a company to build goodwill but only a few days to wreck it if pending issues are not sorted out in quick time.

Role of PR/IR in IPO process

Correct positioning of a company is critical to building awareness about its potential in its business domain. It enables the company to attract eyeballs and acquire mind space in the media and among influencers in the broking and fund management circles. The strategy, among other thing involves:

  • Appropriate and targeted messaging to ensure the company gets proper valuation through genuine investor participation
  • Explaining the company’s key strengths and its business plans in layman’s language so that it is clearly understood by potential investors
  • Advising on story-telling opportunities and how it can be leveraged for the client by a multiple channel approach tailor made for the media and the brokers/analysts

Key is to understand the psyche of investors

Investors always look for factors which separate the company from its peers. It is the marginal difference between a good and an excellent bet. These are:

  • Innovative products
  • Strong research capabilities
  • Dynamic and creative management team led by passionate professionals.
  • Unique business model which meets an unfulfilled need in its domain, like pharmaceuticals, auto or FMCG industry
  • Eco-friendly and sustainable processes like treating waste for wealth creation
  • Ready export market or operational in a niche segment

KEY POINTS IN PR & IR FOR IPOs

Engage an experienced PR and IR consultancy. Early appointment before submission means more time to develop the right positioning/branding/desired profile of the company, and to produce the right supporting materials for the company’s IPO.

Generate the desired publicity not just for a successful IPO but also a successful journey as a listed company. IPOs are just the start for companies going to the capital market. Sustained IR and PR campaigns are critical for success as a listed company for securing investor interest and fund raising programmes post IPO.

It is important to remember that the consultant you appoint for your IPO will be your advisor not only for the IPO but can assist you in communications over the long term. It should ideally be a yearly mandate which can be extended based on mutual comfort of client and advisor. The consultant is the company’s extended arm to field queries from stakeholders and supply the information they want in time. Their job is to take proactive steps to ensure the company is perceived as a thought leader in its area of expertise.