Investment Bank Capabilities
By law, IBs are not allowed to make arrangements with prospective investors prior to going public. They do, however, have investors who can purchase your securities after they are listed. Selling to these investors will dilute ownership of the existing shareholders, which companies usually would not want. However, investment banks will often sell your company’s stock at a higher price than you can to help compensate. They can further help you manage mispricing risk, the risk that your securities are selling for less than their full value.
When going public, it is also important to be aware of the listing rules of public exchanges such as the NYSE and NASDAQ. These exchanges have requirements ranging from number of shares and minimum market cap to overall earnings. After the shares are public, IBs often prevent issuers from selling shares via a lockup provision; the price of shares tends to be volatile immediately following an IPO. Investors may choose to conduct a secondary offering following the lockup period, a common exit strategy for struggling IPOs.
IPOs are long processes, at times taking six months or more to complete. However, Issuer Consulting helps guide you through each step of the complicated process, allowing you to complete it smoothly. Benefits include:
- Help you determine whether your company requires full firm commitment from an IB or “best efforts” (i.e., advertising, share distribution)
- Facilitate regulatory compliance and smooth workflow between you and your vendors
- Help you negotiate IPO terms including share price, etc.
- Ensure that you are in contact with potential investors pre-IPO
- Act as your CFO consultant, or help you find an experienced CFO, essential to complete your IPO
- Review how to manage your company and optimally recoup losses if you’ve conducted an unsuccessful IPO
- Help you navigate the waters of being public including new offerings, SEC filings, managing investors, roadshow conferences, etc.
Along with an IPO comes a significant change in routine for employees and issuers alike. The public is continuously watching your company and scrutinizes your everyday actions. Additionally, the company’s information, as well as personal information, may be less secure. To assist with this, we can consult you through the IPO process and help you and your company adapt to the changing public environment.