PUBLIC RELATIONS
Wednesday 25th July 2018
How to PR an IPO
By Gabrielle Lane,
There’s a story in every share price. No-one knows this better than the executives at Snap Inc, the producer of photo-sharing app Snapchat, which was recently dissed in public by two social media superstars in two months.
Most notably, in February 2018, stocks tumbled by 6% when Kylie Jenner told her 24.5 million Twitter followers that she no longer used the app. The estimated loss in company value was over $1bn. And the story was picked up by news outlets including the BBC.
The news narrative was worthy of a millennial generation gripped by pokes, pings and profile pictures. But it wasn’t entirely accurate. The day before Jenner’s tweet, Wall Street analysts had recommended that investors sell shares in Snap Inc as a result of public disappointment with the app’s new design. And, in the days after Jenner’s tweet, the number of downloads of Snapchat actually increased, according to data from marketing firm SimilarWeb.
Still, faced with fluctuating figures and limited dialogue, media outlets are primed to put their own interpretation on the share prices of large public companies. And those stories could spook investors. Therein lies the danger for comms professionals tasked with managing reputations and preserving brand values.
The biggest comms challenge comes early. From the day a company states its intention to sell shares to public investors (a process known as an IPO, or initial public offering), it is subject to rules and regulations about what it can and can’t communicate about its business, to prevent it artificially manipulating its share price. So here are some tips for PRs faced with a looming flotation and fevered press speculation.
ACT LIKE A PUBLIC COMPANY
Rumoured to be planning an IPO for 2019, ride-sharing app Uber is getting its communications plan on point early.
“We effectively have all of the best practices of a public company, without having publicly traded stock,” Abhishek Gupta, Uber’s head of global strategy and planning, has said. In 2016, he noted that Uber was close to fulfilling all the requirements of a publicly listed company. It stages quarterly conference calls with investors, shares detailed information with existing shareholders, and even discloses its accounting strategy to the US Securities and Exchange Commission.
The tip? Act like a public company before you are one to get the right processes in place and drum up interest.
SEED THE STORY
After registering an intention to stage an IPO with the financial authority in the relevant country by submitting detailed facts and figures in a prospectus, companies are restricted from publishing new information that might affect their share prices for a certain period of time. The widely used US rules dictate that this period extends from the time the application has been received until 10 days after the listing on the stock market. So it becomes increasingly tricky to respond to negative headlines. This means you should assess risks to the organisation’s reputation and be prepared to share them in advance.
Axel Hefer, CFO of travel bookings website Trivago, has said of its 2016 IPO: “Companies are bound to privacy. Since we couldn’t speak to the press as to why our profits were sinking, it was difficult to read headlines about our company claiming that Trivago had $60m in losses.
“If I could repeat this process over again, I would have spent more time educating journalists and the public about what to expect and why... It’s better to have the press on your side.”
TREAT EMPLOYEES LIKE INVESTORS
Even casual exchanges on social media about sales or performance could take on new meaning for potential investors. Employees must be clear about their duty of confidentiality. FTI Consulting advocates that managers visit staff at each business location to inform them about the IPO process and their obligations, mirroring the way in which they travel for investor roadshows.
LET THE NUMBERS DO THE TALKING
Everyone we spoke to for this feature had the same advice: remember that an IPO is not a promotional effort in the traditional sense, but a way to raise funds. Events should be sober affairs, information should be solely financial and internal comms should be the priority.
But Snap Inc did things differently. It recognised that brand values could be seen as a driver of business growth by investors. And so, in 2017, its presentation to investors began with three minutes of imagery and video without text or data (aside from a legal disclaimer). Founder Evan Spiegel used the time to talk through the evolution of the camera and position Snap Inc as the go-to picture-taking app. The message? Snap was an innovative visual platform.
OFFER INTERVIEW TRAINING
“A well-delivered equity story is crucial to the success of an IPO,” says Victoria Brown, head of logistics at Mediatree, an investor-relations and events consultancy.
During a roadshow to drum up interest, a CEO, CFO and investor relations officer will have as little as 60 minutes to convey their company’s financial position to potential investors, and will meet seven or eight investors in one day.
“It is imperative that the presenters are effective and efficient,” Brown adds. “Senior managers should receive speaking training before a roadshow to prepare for a pitch and an often-challenging Q&A session.”
PREPARE FOR NOTHING TO HAPPEN
A deal might not happen. Political and economic events, how rival companies are faring and an unfavourable valuation can all derail a transaction. “The success of the deal is subject to the perfect alignment of multiple stakeholder expectations and is therefore a delicate balance,” says Brown.
Be aware that your company might be negotiating a merger or acquisition at the same time as its IPO, to increase the likelihood of a deal happening: this can change the narrative and sentiment of press coverage.
USE THE IPO AS A LITMUS TEST
Watch how people talk about your business when it’s in the spotlight.
US software platform Box had tried to promote itself as “a cloud-based content-management system” when it filed for an IPO in 2015, but the press and investors had other ideas.
That was a wake-up call for former senior director of comms Ashley Mayer: “Wait, why is everyone suddenly calling Box a cloud storage provider?” she recalled of the experience, in a blog. “There’s nothing quite like an IPO to stress-test the simplicity and resonance of your messaging with your most diverse and critical audience to date.”
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This article was originally published in Influence magazine, Q2 2018.
Image courtesy of QuoteInspector